[JDNovak]

It looks like you are doing all the right things. We had all the same problems but the second USB drive worked. We had a beta unit and now the release version and they both appeared to not read one device and read the other.

The things I know have been problems are:
Copying the Windows shortcut file instead of the actual data (should be 2.79mb on the drive).
Name not right (Making sure the name is DSUD_PKG.BIN on the drive.)
Having auto-loading software on the drive.
Not puting the drive in USB port 1
Not powering up with the drive in place.
Not trying multiple USB drives.

The last one may be all you have left to keep trying. The one that worked for us was a no-name 1gb give-away.

Let us know if anything helps.