Have you tried it on different USB dongles? There are notoriously crappy no-name ones that fake their capacity or have other problems, but once in a while also legit ones can fail in strange ways: I had this branded USB key bought in a regular shop that passed all data integrity tests but refused to boot. I had bought 3 of the same model the same day and the other two worked fine, but that one would never boot, no matter which image i would flash it with; I never discovered what the problem was, and the dongle still works fine for other uses. So you may want to test other dongles to be sure.