If I recall correctly, I think Knoppix et al do NOT want you to eject the CD while the OS is running... which sort of seems like a reasonable restriction. If that's the case, it would have to be a system with two optical drives, or you'd have to copy one to the HD first, or something... or, if they have a DVD drive, you could easily have it all on one disk.

The way flash-RAM prices are plummeting, though, I'd bet on the future of thumb/pen drives instead. The largest I see around now are 1GB, but that's nearly the contents of 2 CDs, and they're getting more capacious and cheaper all the time.