I had the same problem with Ubuntu 1004 netbook version on an Asus EeePc 900A.
I used the usb-creator.exe from the ISO image on Win XP.

The workaround from Joe Edmunds did help:
There is a workaround: choose "Discarded on shutdown..." option when creating 
the USB Startup Disk.

Thank you, Rudolf Reuter

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Can not mount /dev/loop1 on /cow
https://bugs.launchpad.net/bugs/492301
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