I'm taking that line should read c:\syslinux\core\ldlinux.bss, right? Not to nitpick, but i just want get it right.
Yes, you are right. I have corrected it.
Maybe try the -s option for the syslinux install? - EDIT: didn't work. Now i don't even get the Boot error, just a blinking cursor and nothing...
If you have updated all the files like I said before in "c:\ubcd", execute ubcd2usb.bat again. Sometimes syslinux messes up the drive when you install it several times after each other. If it won't work then, download the beta version of ubcd5.0 (see forum UBCD 5.0). It contains a new way of formatting the usb thumb drive.