Re the partitioning - I don't know which Partition Magic issue you're using, but I have (ancient) PM 5.1 which 'understands' ext2 and reiser but not ext3 . It interprets an ext3 partition, which essentially comprises ext2 plus journal structure, as a 'full' ext2 partition.

Now, the knoppix installer will have converted your ext2 partition to ext3. So *if*
Partition Magic still lists it as "ext2".
was *after* your attempted installation, then seems that it is behaving like my PM 5.1

... and it *might* be that XP mis-interprets your ext3 system as (also journalled) reiser. But that is conjecture on my part, as I am lucky enough not to be forced by any requirement to have XP

Have you looked at what GParted reports instead of Partition Magic ? If I remember,it's on the Knoppix 5.1.1 CD and/or DVD, or you can download a dedicated live CD version.

BTW I also find that pure Debian is better for a hard drive installation than Knoppix.