I suspect that once you copy the contents of Knoppix's compressed root filesystem it'll be much more than 1.5GB, so some other stripped-down distro might be a better choice (unless you leave it compressed). But still, the hardware specs for that box seem too low for running Knoppix. I think you should try something like
Puppy Linux instead, which is sort of made for this kind of hardware. I don't know if it comes with a way to install it from Windows onto its own partition, although it should be easy to find-out with some quick Googling. I know there's programs which will install Puppy onto your Windows partition, though.