I had a similar experience with the final Intrepid desktop .iso. We used a 
(final) Intrepid desktop to create a live usb stick (16 GB in size) from a 
(final) Intrepid desktop .iso. We set the option "Stored in reserved extra 
space" all the way to the right, to a value of approximately 15 GB. When 
booting the created USB device, Nautilus showed we had 3.6 GB of free space 
left; a good 11 GB being vanished.
 
Might this be related to the FAT32 filesystem of the USB device (which can 
handle files of maximum 4 GB)? What's the rationale behind the formatting to 
FAT32 instead of (f. ex.) ext3?

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[Intepid] Ubuntu Live USB creator creates liveUSB's that are limited in size
https://bugs.launchpad.net/bugs/284085
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