hi,
I guessed you copied from cd ,so in c:\KNOPPIX\KNOPPIX is a big 700Mb file
which is still a cloop_compressed_iso_file; you should have started a ramdisk
to be able to insert cloop module and use the KNOPPIX file
modify your cmd line as follow:
loadlin.exe vmlinuz initrd=mliniroot.img lang=en vga=791 ramdisk_size=100000 init=/etc/init BOOT_IMAGE=KNOPPIX noapic apm=power-off

once vmlinuz gets the hand,it loads miniroot as a ramdisk filesystem,insert
cloop module then executes linuxrc which scans the cd,hd...to find the big KNOPPIX file
Had you hd_installed knoppix ,then you won't need miniroot anymore (no big
KNOPPIX file to on-the-line-uncompress- but still needs init=/sbin/init to
startup the different init.d/rcx.d stuffs (look at inittab)
HTH