1) There are two problems with option label dos for loading FreeDos balder.img. There is no memdisk file in /boot/isolinux folder and the isolinux.cfg sintax is wrong
The correct syntax is
2) KNOPPIX incorrectly guesses that my serial mouse uses the "Microsoft" protocol, with the result that my mouse pointer hops around almost at random. It works correctly if I edit /etc/X11/xorg.conf replacing the mouse protocol "Microsoft" with "MouseSystems" or "auto". Since the "auto" protocol would presumably work with a "Microsoft" mouse, too, that would seem to be a better default for KNOPPIX to use.