I used to use knoppix for this, but 5 years ago or so they seemed to take things in another direction ... I think Ubuntu and some other distros pulled enough people away which left Klaus a little less capable of supporting all the various projects Knoppix had split into.

If you're not married to Knoppix check out remastersys which works with Ubuntu-ish distros (like mint). Might be helpful:
http://maketecheasier.com/backup-ubu...sys/2008/12/22
http://askubuntu.com/questions/95392...-squashfs-root
https://help.ubuntu.com/community/LiveCDCustomization

If you want it with KDE to give you a similar experience to Knoppix:
http://www.howtoforge.com/creating-a...-using-kubuntu