What is the make/model of the USB drive you're installing to? Typically Sandisk Ultra Fit's are the most recommended. Kingston drives have some known issues, and don't even consider installing to a generic unbranded one :)
Oh ok, I didn't know about that..
1. Sandisk Ultra Fit 8gb is the one that I'm planning to install FreeNAS on.
2. Kodak 8gb very old drive that I had on my desk.
I guess that I have to try replacing the kodak with a different drive? It's strange because it's right after I select FreeNAS Installer from the menu, then everything loads and I get the error.. So it's able to read all the installation files that are on the Kodak usb, it's just having trouble installing on the sandisk?