I really appreciate that you share this!
The first rule about remastering is, don't do it. But it's not the last rule...

I would like to postulate a few more good (IMHO) reasons for remastering, I fully agree with yours.
3. Bloat. The DVD contains gigabytes (uncompressed) of programs we will probably never run. While some essentials (every man his own!) are missing.
4. Bugfixes made permanent, moved from "user space".
5. Extra package install/updating made more systematic.
6. Smaller total system footprint. Will always be relevant, if not so important economically as storage gets cheaper.
7. Possible to make several cloop images. Could be useful for things like heavy development tools.
8. Could even try other approaches than through cloop.

I imagine that a good way of doing the full KNOPPIX upgrade, would be to copy the newly made compressed image to, for example, an external USB HD, and do the "field testing" on that. Speaking for myself, I'm pretty sure I would want to make quite a few adjustments.