1-) I didn't use Knoppix before, so I don't know if there is any distrubition resembles that.
2-) I use Red Hat9.0 I like it, it is fine
But I also used Mand. 9.1 for a new Linux user, I think difference in distrubutions won't change alot. According to my experience, Mandrake's configuring the system interfaces are designed very user friendly. I mean you can set almost everything from Mandrake control center, however in RedHat there isn't such a use friendly complete environment, so you should usually set things by different programs, which is more sophisticated then doing the same job in Mand.
I wish other people would add more to first and second questions! that a long task.
3-) It will be no problem to use two hard-drives one for Linux one for Windows (I guess). You cannot change your operatin system instantly of course but when your computer starts there are booting manager which enables you to select your OS. Most popular ones are Lilo and Grub. In fact during installation process you configure your boot manage, so you don't have problems. Dual booting a very common done thing and so simple use and configure. Do not worry about that
By the way Linux can handle FAT partitions very well, so you can use your FAT partition also from Linux. So that you share data with your XP. But be careful writing to NTFS from Linux can damgage your drive, don't do that. Use FAT partition for such a share.
4-) You won't have problem in finding software. There are many softwares written for Linux, and they are done for various Linux distributions. If you cannot find such a package you can also install from source. I mean don't worry about that business also
Well don't worry about anything on Linux
Once you install you will see that, it is not less than XP