that looks like a slightly different error than before,
that one LOOKS like it could still be trying to go to your CDROM.
to give a little more detail, there is a special file system, developed just for "live cd's called "squashFS" its a compressed file syste, and it LOOKS like it is still trying to load it from the CDROM, which leads me to a few ideas.
#1 reformat the USB in FAT and make sure the partition is active
#2 check your BIOS and make sure that it's set to BOOT from your USB.
In my LAPTOP, mine shows up under the HARD DRIVE section, in my desktop it shows a seperate listing for USB devices.
#3 do we KNOW for sure that this PC is ABLE to boot from the USB
Maybe you should TRY to boot from the CDROM, I believe that one of the selections on that menu is to THEN boot from USB.
IF that works, at least THEN you know that the USB key is ok.
I do remember my original days of working w/ MCNL were harder than I thought they should be, but now it pretty much runs on auto pilot for me.
I do have a step by step text file located here
http://www.thehess.org/Rollyourown1.htmlthat might help you out.
J