Hi thanks for reporting this. What ubuntu version are you using?

In intrepid there is usb-creator that makes a live-USB which allows you
to run ubuntu off a usb and also install ubuntu to the hardrive if
desired, the same as a live-CD. I don't know what terminology will be
settled on, I think it won't be called a live-usb. You can access it in
intrepid with system->administration->create a USB startup disk.

Im not sure how to determine if your bug is with the the intrepid iso or
with isotostick.

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Intrepid alternate USB boot requires a cd
https://bugs.launchpad.net/bugs/290166
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