To boot from USB stick you must use the same trick as booting
from hd, extrating from boot.img two files:
"miniroot.gz" & "vmlinuz"
and create lilo on USB stick.
Does a USB stick has an MBR?

Please play with the small Knoppix kix (195 MB) for the first
trys. Or if you have only > 128 MB play with small Linuxes
fd-projects and write about your experiances - success here.
rob