Two main reasons not to find the filesystem :
1 the "cdrom" is not found due to either ide-cd or scsi-cd (sr0) not properly loaded at boot (any away not builtin into kernel)

2 the cdrom found but not the KNOPPIX compressed file ,due to either improper cloop.ko (if cloop is used ) not fitted with kernel version in use or bad squashfs (not loaded, bad version 3.4 is quite different from < 3.3 )

Try debugging the following way when dropped into the "ash shell" .(you really need to examine /proc/_procfs because ash is so poor in commands compared to any recent busybox )

a cat /proc/filesystems to see which filesystems are recognised by the kernel
b cat /proc/modules to see what modules had been loaded properly
c ls /sys/block to see what block devices are recognised (lost of "ramj" ramdisk ,may be hdx or sdx depending on what
had been raised in config_compile_kernel with IDE and/or scsi stuffs )

d try mount /dev/whateverseenin_c /cdrom && ls /cdrom
if nothing seen in cdrom mounted then you spot your problem !

HTH