I have installed as advised:
The output is:
root@Squeeze:/home/user# module-assistant auto-install cloop

Updated infos about 1 packages
Getting source for kernel version: 2.6.32-5-686-bigmem
Kernel headers available in /lib/modules/2.6.32-5-686-bigmem/build
apt-get install build-essential
Reading package lists... Done
Building dependency tree
Reading state information... Done
build-essential is already the newest version.
build-essential set to manually installed.
0 upgraded, 0 newly installed, 0 to remove and 254 not upgraded.

Done!
unpack
Extracting the package tarball, /usr/src/cloop.tar.bz2, please wait...
Target package file
/usr/src/cloop-module-2.6.32-5-686-bigmem_2.6.31.1.1+2.6.32-41squeeze2_i386.deb
already exists, not rebuilding!
(however, you could use the -f switch to ignore it)
dpkg -Ei /usr/src/cloop-module-2.6.32-5-686-bigmem_2.6.31.1.1+2.6.32-41squeeze2_i386.deb
Selecting previously deselected package cloop-module-2.6.32-5-686-bigmem.
(Reading database ... 145794 files and directories currently installed.)
Unpacking cloop-module-2.6.32-5-686-bigmem (from .../cloop-module-2.6.32-5-686-bigmem_2.6.31.1.1+2.6.32-41squeeze2_i386.deb) ...
Setting up cloop-module-2.6.32-5-686-bigmem (2.6.31.1.1+2.6.32-41squeeze2) ...
root@Squeeze:/home/user#
What is meant by this ( README.Debian in :
configure the kernel with zlib functions, set the config
variable CONFIG_ZLIB_INFLATE to y!
I will now reboot...
I have the following codes.
insmod cloop.o file=/path/to/compressed/image
losetup /dev/cloop1 /path/to/compressed/image
mount -o ro -t whatever /dev/cloop /mnt/compressed
mount cl /mnt/misc -oloop=/dev/cloop0
Which codes do I use to access the KNOPPIX file and change my root directory to chroot and then boot from there. I will try insmod cloop.o file=/path/to/compressed/image replacing the actual path to the image.