I have been going through the LFS book (http://www.linuxfromscratch.org/), and it is a really good way to learn how Linux works, inside and out.

I agree that Live CDs are very good for people who just want to quickly use a tool instead of installing it. I still use Live CDs all the time, depending on what I need to do.

But, I also agree that it's very important for hackers to have some skills using Linux, and I am planning on putting together my own attack OS with LFS. After I'm done, I'll probably just say "okay, that was fun, now back to Gentoo", but it will still be a good learning tool.