fb1024x768 == knoppix so it would be :

fb1024x768 nosmp noscsi lang=us

BTW, your graphic problem mostly has nothing to do with the error you saw.

I see it all the time on my Dell notebook(the invalid mode stuff) and it doesn't matter. You only got a 640x480 X usually means the native driver failed to load and it drops back to vesa or svga or the native driver is loaded but some configuration in /etc/X11/XF86Config-4 prevents it from using the best resolution.

I don't know if XFree86 4.3 supports the latest Intel integrated graphic chips. fb won't help in this case as the last time I check, it is not included in the kernel for Intel graphic chips.

edit: A brief check on Intel said that there is driver(chipset 82865G) for linux, it belongs to the i830 family. Try to see if it works. Otherwise, you need to download the driver from Intel but how to put that on KNOPPIX would be another issue.