I have no knowledge of why Klaus chooses to do what he does or does not do.

My use of Knoppix has always been limited to the Live CD or DVDs that it was designed for. I have tried to get flash drives working in the past, but never with any luck. Others have gotten this to work so I will accept that the fault is with me but I do not believe it is obviously simple. Nor have I had much luck with installed Knoppix and "persistence". For normal Linux installs I suggest distros that are intended to be installed to disc, with my personal choice being Debian.

There are tools that have been developed that will install an ISO to a flash drive and make it bootable. But they are not really want you want either. That would only give you a "Live DVD" read only version of Knoppix stored on a flash drive, and you seem to want a fully functional and flexible read/write system on your flash drive. All that I have to offer here is that isn't Knoppix. Can it be make to work? I believe the answer is yea, kinda, sorta, with more effort than it is worth and with more issues cropping up in the future. Again, I suggest installing a distro like Debian to your flash drive.