I tried 20080721 again, to be sure I hadn't muffed the usb install. I redid the setup of the key, as described in the initial report,double-checking I did not have the think mounted by usbmount or whatever while I was zcatting to it.
Same result. I see 'linux....' and 'initrd.gz....' all the away till it says 'done' or 'complete' or whatever. And then back to the BIOS.