Actually I haven't found a reason to set the password for the knoppix user, only the root user. And that's really only for the use of the kdesu to open GUI programs with root privileges. I gave the debian forum thread how-to link so as to enable that aspect which is for some reason turned off in KDE 4. Really nonsense not to be able to simply invoke kdesu dolphin in order to do GUI file management.

And it's MUCH preferable to any form of logging in to the whole GUI as root user. That opens up a world of vulnerabilities so that the user might as well be using Windows XP or earlier. One is turning off all security and subjecting the entire system to modification by any nasty out there.

As for lxde or KDE or any DE, that's user preference. If the OP likes KDE and its GUI tools, which from reading the docs on the lxde website make me believe are much more GUI oriented than lxde, then there's no reason not to take advantage of them.