You can effectively get what you want by copying the /KNOPPIX directory to any drive already used by Windows (still need 700MB or so of space).

"But, won't I have to burn the CD first?" NO!

Go grab Daemon Tools (for the Windows folks) and mount the ISO as a virtual CD. THen, just use Windows Explorer to copy /KNOPPIX to the root of any accomodating Windows volume. Create the boot floppy as you wish and when you reboot with the floppy, everything will run off of the hard drive.

-SUO