A $20 1GB memory stick should be able to hold the whole LivedCD, with space left over. Is there some reason you don't want to take that simple route?
Anyhow, to make a memory stick bootable, just pop it in and use one of the partition editors to set it up with an active partition, and then do a grub-install on the (unmounted) device to get a MBR on it. (In fact, that will install a full GRUB boot system, so you can run whatever you want to boot on the stick and point GRUB at it.)
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