Since the first version 7 of knoppix I'm also having trouble creating bootable usb drives. The only way I've found to make it right is by formatting the usb drive as FAT32 using gparted. Then, when the installer asks if you want to partition and format the drive or just copy the required files, I select only copy files. If I select partition and format, it doesn't work. All the required files are copied to the drive, but for some reason it's not bootable. Try doing as I said, it works most of the times.