Have you tried a different USB-stick? Maybe a different USB hub? At work we are having loads of problems with USB hubs, some of them just doesn't work correctly. I had some troubles with OF recognizing my USB-stick, but eventually it started to work, don't know why I had the problems.
Second thing that gave me problems was my USB to PS2 k/m adapter. It just didn't work with MOS it hang on boot everytime.
Hmm btw I have to check if this problem is corrected with MOS 2.1
