Same here, still a problem in 10.04.  Installing from usb needs work.
Ubuntu is too fixated on optical media.

I put Ubuntu Server 10.04 (amd64) on a 1G usb flash drive.  This is for
installation on a netbook with an Atom N450 and without a CD drive.
Just getting Ubuntu Server on the flash drive was too much work.  There
was no easy way to put Ubuntu on a flash drive from within Arch Linux!
The executable from the unetbootin web site won't run unless version 12
of libpng is present (Arch moved on to version 14 some time ago), and
setting up usb-creator outside of Ubuntu looked to be a lot of trouble.
I finally booted into Windows to do that part.  (You should be ashamed
that you made me boot up Windows.)

On the netbook, Ubuntu Server booted fine from the usb drive.  But the
installation process insists on finding a CDROM drive, and that netbook
has none.  I tried F6 and typed in "install cdrom-detect/try-usb=true"
on the kernel boot parameters.  Didn't make any difference.

-- 
Alternate CD cdrom-detect.postinst does not consider USB flash drive/key. 
https://bugs.launchpad.net/bugs/234185
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