When attempting to install some versions of Ubuntu Server with a USB drive the install will fail when it attempts to detect and mount the CD-ROM drive. Of course, you’re not installing from a CD, so this can seem odd. Tons of forum posts and support threads can be found about this issue, but the answers are often incomplete or contradictory. The following steps should allow you to complete the installation of at least 10.04 without resorting to a network install or a CD-ROM drive. Please note that this is not an official guide and is not endorsed by or on behalf of Canonical :)
Assuming you’ve used UNetbootin to create the USB stick, boot to menu and press tab before selecting an option. This will give you access to the kernel boot line. Add the following before the “–“:
Press enter to begin the install. It will fail again at the same point. Press Alt-F2 to bring up a terminal. Unplug the USB drive, plug it back in, then enter the following command:
tail -n 100 /var/log/syslog
You should see evidence of the USB drive being detected at the very end of the output. Press Alt-F1 to return to the installer, fail through the CD-ROM detection if you haven’t already, and select that step again. This time, it ought to detect the USB drive and use it as a CD-ROM.
That should be it! Enjoy your Ubuntu server!