This doesn't have anything to do with Win98. It has to do with BIOS settings.

Do you have multiple CDRoms?

I had this problem at work. I had two CDRoms and the BIOS was set to just boot from one of them.

I set my BIOS boot like this:

CD-ROM (CD1, then CD2)
Hard Drive
Removable Media

Another thing I would check is: Is the knoppix disk that you made any good?
I burned a couple duds and they wouldn't boot.