Keep sda4! Just delete sda3 and put an extended partition ("new sda3") in its place. If you want sda3 to have more space, shrink sda2 before creating new sda3. New sda3 is just a container for several logical disks which you can use for Linux partitions including swap.

Example:
sda1, primary partition
sda2, primary partition, bootable
sda3, extended partition ("container" for logical disks sda5 thru sda7)
-------->sda5, ext3 = Knoppix root partiton
-------->sda6, linux-swap = swap partition
-------->sda7, FAT32 = data partition to be used with Knoppix and Windows
sda4, primary partition

P.S.: "Extended partition" refers to a section of your hard drive, it has nothing to do with filesystems such as ext2 or ext3.