Now, is that worth $100? Probably not, as the number of computers which do support booting from USB cd. drives but not USB flash drives is pretty low.
Edit: Though as some other mention, some OSes on the other side of the equation are hard coded to install from the optical drive.
Ideally I want all of my install disks on one drive, since I never know if I need Ubuntu, Windows 7, Windows XP, 64 bit, 32 bit, etc. I'm tired of juggling physical media and isos.
You could even patch Grub to scan the first partition for filenames ending in ISO and present them in the boot menu automatically.
This would be a starting point: http://www.panticz.de/MultiBootUSB I might hack around and see if this can be automated and made to be user friendly.
Also, yes, the howtos I've read sound very fiddly, and it would be a lot more attractive if it were automated and user friendly. If this is done in hardware to look like a CDROM drive, that is the most automated and user-friendly solution. Even a fully-functional Grub2 that can chainload Windows isos will still be a little less elegant.
I guess I don't understand why you need to emulate a DVD drive except for legacy operating systems. When I burn ISOs or images to a jump drive, they show up as DVD media in OS X and Windows 7, and the installers for every version of OS X that I remember and Windows 7 will all install perfectly from a jump drive.
It sounds like this is just a piece of firmware to do the trickery of processing the ISO. There are Sandisks that show a CD and a Flash drive and it's all done in partitioning, there's no software involved and it's undo-able via software.
I can only see this being useful if you have a BIOS that boots from USB-CD but not USB-HD. Again, I may be missing something. This sounds cool, but I'm not sure why exactly.