Before I installed Evan's version, I tried "Create a USB startup Disk"
once more on two USB drives - a Kingston Data Traveller II [4GB] and an
OCZ Rally II [4GB] -

Before I started, I ran GParted [To install "sudo apt-get install
gparted" - it then should be in System -> Administration as Partition
Editor] and formatted the sticks with a fresh FAT32 file system.

On the OCZ I created a "Documents and Settings" area of about 400MB and
didn't create any on the Kingston key.

Restarted my machine and everything booted and loaded fine using both
sticks, the "save my changes persistence file" is genius as well,
although thats for another day. Did updates recently come down for usb-
creator. The last time I created sticks it cured the problem with Error
17 and I got the Ubuntu selection screen (success?) but as soon as I
picked the first option, Ubuntu started loading and ran into ACPI
errors. This time around I used the exact same image file but did it on
a different computer and it made successful sticks that booted the whole
way into Ubuntu. Thats weird in my opinion.

-- 
"Create a USB startup disk" does not create bootable USB sticks - GRUB Error 17
https://bugs.launchpad.net/bugs/285713
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