If your USB is incompatible, some are, then you can format a 1GB partition at the end of your hard drive if you want, or any other spare small drive you might have laying around. Yes it will need to be formatted to FAT32

Did you check the BIOS to be sure Legacy or USB Storage was enabled in the Integrated Peripherals page? That has to be enabled, as well as the other USB Settings, then you must leave the USB plugged in when you reboot to DOS.

Then you will want to press F12 on the POST/Splash screen to get to the boot menu, then choose +HDD, then on the next screen you will see your USB Stick. Select it to boot to DOS.

The above options you mentioned are not how you want to do it, do as I mentioned above and leave your HDD as the first boot device in the 1, 2, 3 boot order.

As for CD flashing, I will have to make you an ISO. If you need that please let me know what BIOS file you want to use and I'll make you a bootable ISO to flash with.