I too have had this problem but for me it hangs if the USB stick is connected right from the start up regardless of wether its from the cd or hard drive. To try and remedy this i have checked /etc/fstab and uncommented the part for the flash drive and have also used modconf to try and install the (what i hope to be) correct modules under "usb storage devices" i havent tested this yet but if all goes well then i will let you know.

I like knoppix as well, and have been trying to get everything to run smoothly for something close to 6 months now!

Good luck and i hope that some of this helps