Boot from your cd not your hd install, use:
knoppix 2
at your boot prompt. Then (as root) mount your hd install read/write, (let's assume your knoppix hd install is at /dev/hda1) so:

mount /dev/hda1 /mnt/hda1
mount -o remount,rw /mnt/hda1

then:

cd /mnt/hda1/etc

and using a console editor (vi, nano etc.) or mc and edit your inittab file and in the id:initdefault: line substitute: 2 for 5

# The default runlevel.
id:5:initdefault:

Change to:

# The default runlevel.
id:2:initdefault:

Editing your ininttab file should fix your startup problem, but if you want to (or need to) edit your lilo.conf file you will need to chroot to your hd partition:

cd /mnt/hda1
chroot /mnt/hda1
cd etc

then again use a console editor and edit your lilo.conf file, save it and the run lilo:

/sbin/lilo -v

Pay attention to any error messages lilo give you.

HTH

~rock