After testing, I can confirm that the error occurs whenever I boot "knoppix 2", but never when I boot into the GUI, even after running "init 2" from a root terminal in the GUI. I expected "init 2" to close the GUI and kick me back to text mode (same as "knoppix 2"), but it didn't and had no visible effect whatsoever. I'm not convinced that "init 2" breaks XAUTHORITY after the GUI has already started. For now, I'm booting to the GUI and doing my business in a root terminal window. I would still love to get this fixed in text mode.

As far as automating my mounts, I run Knoppix from a DVD in various Windows boxes that I maintain. So that is not an option for me, thanks though.