At a guess I'd say it is looking for grub on the USB stick. No idea why or how. Does it boot correctly with the USB stick plugged in ?
Have a good search in the forums, and then the wiki and bug tracker, (I have a feeling I have seen something vaguely similar but cannot remember where) and if it is still an issue please raise a new bug.
B. Rgds
John
Was the norm prior to the sme9.# iso which was a hybrid ISO image
Also saw the issue when using a HD that had been previously used as a windows system, required zeroing using
# dd if=/dev/zero of=/dev/sdx bs=512 count=1
Lots of forums posts re above