Success story! I used to get only to the point where:

[20:20:25] Installing...
[20:20:25] Source CD: /home/konrad/Download/ubuntu-8.10-desktop-i386.iso
[20:20:25] Destination disk: /dev/sdc1
[20:20:25] Persistence size: 6366 MB
[20:20:25] Marking partition 1 as active.
[20:20:25] installing the bootloader to /dev/sdc1.
[20:20:25] Forcing shutdown of the install process.

and nothing happened. It turned out (after some printf-debugging in
backend.py) that I had no 'mtools' installed. I installed mtools and
that problem was gone.

You can check if that is your problem by looking up the device of your
USB drive's single partition (e.g. /dev/sdc1) and trying the command

  sudo syslinux /dev/sdc1   # if /dev/sdc1 is your USB stick's VFAT
partition, better check twice

If mtools are missing, syslinux will complain.

-- 
Hangs on "Starting Up"
https://bugs.launchpad.net/bugs/295212
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