I finally was able to get dsl to boot from a liveZip. I'm posting this from a parallel port liveZip damn small linux!
The first thing I did was get the zip drive working from the liveCD so I could set it up. I used the following commands:
sudo su
mkdir /mnt/zip
modprobe ppa ### the drive needs both power & a disk here
mount /dev/sda4 /mnt/zippy ###you might have a different sda#
look at the drive and make sure it's nothing you want and make sure that you're looking at the real zip drive. When your sure it's nothing you want, unmount that drive and use cfdisk to repartition it. I made a 55 Meg primary partition type linux and made the rest a linux swap partition.
I rebooted at this point because cfdisk said to, I don't know if I needed to but I did.
Then I ran through the steps to get the zip drive working again and mounted sda1 (your number might be different). I copied the KNOPPIX folder to the zip drive with
cp -Rp /cdrom/KNOPPIX /mnt/zip/KNOPPIX
You need to be careful with zip drives for a few reasons. One is the speed. It isn't all copied until the disks stops spinning, and that takes about 2 minutes. You'll hear it. There is a lag between when you tell it to write and it actually does write. When it's done, umount zip and then remount it. Now run an md5sum on the /mnt/zip/knoppix/knoppix file. Yes, the filename is lower case now. Check that against the md5sum of the /cdrom/KNOPPIX/KNOPPIX file. If they don't match or you get an error, don't continue. Believe me, do it again until they match and remember to unmount and remount before you run the md5 or you'll get the right answer, but it won't be real. The disk is going to spin a while during the md5 sum, but not as long as the write time.
Next download the boot floppy:
http://ibiblio.org/pub/Linux/distributions/damnsmall/current/boot-0.8.0.img
Upon booting from the floppy you need to actually type "dsl zipboot"
(Thanks to Clacker)