OK
so you want LiveCD persistence on CD with Ubuntu?
https://help.ubuntu.com/community/LiveCD/Persistence
so, from what your saying you want to create a persistent partition
on a 16gb usb?
Just use Gparted, format the usb as ext3 and label it "casper-rw"
or
assuming usb is /dev/sdb1
Code:
sudo mkfs.ext3 -b 4096 -L casper-rw /dev/sdb1
in terminal
when you boot the cd at boot menu press TAB and enter "persistent"
anywhere on the boot command line...
For a lighter weight Ubuntu try my nFluxOS 10.04 or 10.10 editions
at my site...
you also said you were open to using other distro's
but what features are most important to you?
what purpose will it have?
just general web browsing or what?