I don't know about Fusion, but I think there are several reports about succesful virtual installs of Knoppix under Linux or Windows hosts, running with VMware Workstation or Player. If you have install problems on your Mac, would it be possible to run a Knoppix VM created elsewhere? I guess the tools installation would run just fine when the basic persistent install is up. I would also guess that remastering with tools, even though possible, would be an unnecessary complication.

I've been using VMware Workstation for years, but only on Linux hosts running Windows guests. And WS7 works very well on a Knoppix 6.2.1 host, I have installed and run the whole Windows series from Win 98 to Vista, on a machine that could natively only run XP.

With Knoppix, you have a lot of headroom with the init process, skipping large parts of autodetection etc, or substituting your own scripts/programs. A lot can be achieved just juggling the cheat codes.