I have not used damn small before, but I will still try to help. To see if it is running, grab a console and navigate to where the startup scripts are stored. On Slackware, this is /etc/rc.d/. You should see a script that starts hotplugging. Try typing "find | grep hot" without quotes of course. Check the permissions. If they are set to execute, it's probably running, but to make sure just try to run it and it should list some options. If it's running, stick in your flash drive and try to mount /dev/sda1 somewhere. If that doesn't work chances are the kernel module you need doesn't exist and you will have to recompile the kernel.
If you need to recompile, I highly recommend upgrading to the latest kernel at www.kernel.org
and click on F. There are many tutorials on this, and it's very difficult to do right the first time. I wish you luck. Also, I recommend that you use udev rather than the old hotplug system. It's more efficient and gives you a lot more information about what's going on. Here's a helpfull site for getting started with udev.
and for more information