Is the casper-rw file on the same partition as the CD media?  To be
clear this is what my USB stick looks like:

 $ ls -lh /media/disk 
total 1.1G
-rwxr-xr-x 1 root root  134 Sep 21 10:43 autorun.inf
drwxr-xr-x 3 root root 4.0K Sep 21 10:43 boot
drwxr-xr-x 2 root root 4.0K Sep 21 14:10 casper
-rwxr-xr-x 1 root root 1.0G Sep 22 04:36 casper-rw
drwxr-xr-x 3 root root 4.0K Sep 21 10:46 dists
drwxr-xr-x 3 root root 4.0K Sep 21 10:46 efi
drwxr-xr-x 2 root root 4.0K Sep 21 10:46 install
-r-xr-xr-x 1 root root  32K Sep 21 10:47 ldlinux.sys
-rwxr-xr-x 1 root root  18K Sep 21 10:43 md5sum.txt
drwxr-xr-x 2 root root 4.0K Sep 21 10:46 pics
drwxr-xr-x 4 root root 4.0K Sep 21 10:46 pool
drwxr-xr-x 2 root root 4.0K Sep 21 10:46 preseed
-rwxr-xr-x 1 root root  227 Sep 21 10:43 README.diskdefines
drwxr-xr-x 2 root root  12K Sep 21 10:47 syslinux
-rwxr-xr-x 1 root root 2.4M Sep 21 10:43 wubi.exe

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https://bugs.launchpad.net/bugs/1040401

Title:
  Lubuntu Live CD - AMD64+Mac 12.10 build Aug 21 2012. Persistence
  functionality not enabled.

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