I'm interested in creating my own distro to fit my own needs. I've come to the conclusion that a "from scratch" approach isn't really needed. I have the idea in my head of creating a Debian based distro with my custom setup ideas. I really don't want to discuss my needs as it leads to off-topic chat which is what I've only seen so far.

The simple question I guess i'm trying to get at is how did the creators of say ubuntu/knoppix get started?

They would get a system running the base distro they want to work from, then make the configuration changes they want, get the source packages for what they want and make any changes to the build sequence to give them the configuration they want.
[ "Branding" with logos etc is a part of the second step. ]

then they build an iso image of a installer and test installing their system, making sure it will install.
then they put it out and see what people think, working on updating each package included for next version.
they monitor security issues and put out patches as needed for security fixes.
they monitor dev lists for included packages to put out bugfix patches as needed.
they also put out updates to install new versions of packages included.