Well there is this word persistent that is bugging me. In the output of mounts above... and in the knoppix-image menu options. IE. "Add as persistent, writable system area" Now I unchecked that... and mounted it. Upon reboot, and remount, no error.

So what does that persistent aspect/option mean?

I also tried something crazy... I threw in a fuser -v -m right before the line 204 in knoppix-reboot... and at the first invocation...
it mentioned 2 files were still in use... pump and init.

I also tried something else... saying no to all knoppix.img mounting options... and then doing a
umount /KNOPPIX.IMG, which was successful. Then a restart of knoppix-image mounts without a fsck check. So it is the way the system is being brought down.