One thing: do you boot from diskette? Don't forget the July releases have the
newer kernel, so you'll need to upgrade your boot diskette, or the kernel image
that loadlinux launches (that's how I work)

My installation uses /dev/hda1 fat32

I routinely download new ISO's and just extract the big compressed image
to C:\KNOPPIX\KNOPPIX. Has worked for 5 or 6 releases so far.
I really enjoy such simple upgrades to the latest and greatest.
Combined with persistent home and configs, this is amazingly smooth.
If only the same kind of setup was safe with NTFS, it would allow many
people to try linux alongside WinXP....
Oh well, that'll come in time. Knoppix as it is is already a godsend!

Let us know whether the kernel bump was the issue.