Cloud hosting: Would you care to tell us more about what you want to achieve, and maybe why?

Another option I've been looking at is to buy a virtual machine (say VMware) and install it myself.
For this purpose, I don't think you need to buy anything? Vmware and other vendors have free tools for running virtual machines, and I think there is no problem using a non-free program creating a Knoppix virtual machine. For example, I am a licensed user of Vmware Workstation, and if they want to sue me for using that to create a Knoppix virtual machine and giving it to you, so be it. But I don't think that's a problem at all. Problems come with distribution of e.g. Windows virtual machines, not Linux distros.

There most be some providers out there that share my love of knoppix!
Probably yes, but, when we first go through the pains of creating a virtual machine, is there really much to gain from using Knoppix? I guess I would rather consider 64-bits ordinary Debian (for performance and Knoppix compatibility). It's more of a hassle to set up, yes, but using virtual machines, you only do it once.