Looks like it is used for the CD auto-detection I don't think you need it for hd install and when you go to remove it only wants to remove the one package.
Code:
[01:23 PM Tue May 27: root @ /home/stephen]
># agrs playvideodisk-knoppix
Reading Package Lists... Done
Building Dependency Tree... Done
The following packages will be REMOVED:
  playvideodisk-knoppix
0 packages upgraded, 0 newly installed, 1 to remove and 18  not upgraded.
Remv playvideodisk-knoppix (0.5-2 )
So removal is up to you it's not going to break xine it's just a work around script like it says in the description.