I've found the problem with the deleted files! It has to do with when I installed WinSetupFromUSB in C:\Program Files. I guess that config file I mentioned which is created shortly after hitting GO is responsible. It gets created in the wrong place. Sorry I don't have a name for the file because it is given the name "Program " (with space at the end). This is the full contents of that file:
Signature = "$Windows NT$"
;Handy macro substitutions non-localizable
REG_SZ = 0x00000000
REG_BINARY = 0x00000001
REG_DWORD = 0x00010001
REG_MULTI_SZ = 0x00010000
REG_SZ_APPEND = 0x00010008
REG_EXPAND_SZ = 0x00020000
I also noticed when I installed WinSetupFromUSB in default location on C:\ the prepared USB has one extra file (don't know which one). I'm guessing it is because that config file transferred correctly to USB?
Hope this helps you track down the problem. I'm happy now that my USB isn't deleting itself anymore. Mainstream, here we come!!!