Ah! lol, i should RTFM
In the readme.txt there is a section that outlines creating a Qemu virtual harddrive on your USB stick. Works like a charm!
The final command listed in the process (starting with cp /KNOPPIX/lib/etc...) generated an error, but everything seems to be working fine nonetheless.
I just booted DSL, saved a few things, backed-up, re-booted the image on my flash drive, and BAM! PERSISTENCE.