I have recently created a Lucid liveUSB disk using Karmic's 'Startup
Disk Creator' and the liveUSB is working fine (I am writing this from
Lucid liveUSB). The version of Karmic's 'Startup Disk Creator' was
0.2.12 according to synaptic. I haven't tried with 0.2.22.

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Can not mount /dev/loop1 on /cow
https://bugs.launchpad.net/bugs/492301
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