If youre referring to the Death Knight template in Mongoose Publishing's Necromancy book, that is a different monster with the same name as the DnD Death Knight from the Fiend Folio.
The original Death Knight was more demonic than undead, and could, indeed, cast 20th level fireballs.
Mongoose Publishing didnt have the rights to publish a conversion, so Scott and Matt Sprange (of MP) worked together to write up an undead knight called the Death Knight.
Same name, different monsters. The confusion you felt is pretty common, actually...
Erica hit it pretty much on the head. The original conversion I did was like the original version found in the 1e FF. You can find it in the Creature Crypt section of my site:
The one in the converted monster area is listed (with permission of Mongoose Publishing) as the one that I did for Necromancy: Beyond the Grave. Matt wanted it less demonic and more undead, hence the change in powers and abilities.
Might I add that both are very cool in an unholy kind of way
I'm planning on using both for my campaign, but I will wait until I'v acuired the Epic Level Handbook, which means, it will have to wait till the end of the summer.
Ah, but both types are undead. Only difference is that one type was created by an unholy pact between a demon lord (Demogorgon to be precise) and a mortal, whereas the other was created by mortal magics.