The first thing you will want to do is run disk defragmenter on the Windows XP installation.
Then you can resize the hard drive, shrinking the XP partition and then create a new partition from the available free space. Then you will be able to install KNOPPIX Linux on the new partition.
As for the tools available to resize the partition, you could check if there is still a trial of Partition Magic.
If you know a little about GNU/Linux already, then you could use qtparted, which is available on the SystemRescueCD LiveCD project.