I downloaded the 10.4 release and used usb-creator-gtk (under ubuntu
9.10) to create a bootable USB disk. This one booted without problems. I
used another device, so I am not sure if the USB stick was faulty, but I
had successfully used it to install on another computer before.

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Installing from USB disk fails: Can not mount /dev/loop1 on /cow
https://bugs.launchpad.net/bugs/569730
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