I have been working on getting compcache included into Ubuntu as compcache significantly reduces the amount of memory required to use the LiveCD. Compcache is much faster than harddisk swap and is definitely better than no swap at all. See:
http://code.google.com/p/compcache/

I have made patches against the Ubunty 7.10 liveCDs, unfortunately this technique won't work for patching Knoppix as I understand Knoppix does not use squashfs (though we could perhaps replace the initrd instead).
http://www.ucc.asn.au/~mccabedj/ccache/

Currently the feature freeze is the only thing keeping compcache out of Ubuntu. My work on getting compcache into Ubuntu is at:
https://bugs.launchpad.net/ubuntu/+s...24/+bug/200765

More discussion of compcache is avaliable at:
https://lists.ubuntu.com/archives/so...ry/011089.html
https://lists.ubuntu.com/archives/ub...ch/003493.html
https://lists.ubuntu.com/archives/ub...ch/003516.html

One question: would it be best to get compcache into Debian first? (before Knoppix)