What's the point? SQUID can cache on the hard disk, so in case of Live CD, it will cache only in RAM...so everything's lost on reboot....Anyway, I have never really tried an Live CD, but considering Knoppix is the most used one, I guess it might have squid. Or maybe Ubuntu.
AW - well as u well said.. the caching wud either be in RAM or HDD, so though not to unnecessary giveout my RAM to knoppix or Ubuntu types.. why not save all the fuss and have a basic text mode with just the very bare bones... even smaller than DSLinux. Did try exp with DSL on HDD, with Squid... but left it mid way.. will try again in few days.