I just found the easiest way to create Ubuntu 8.04 live usb flash disk, thanks to this nice tool: http://klik.atekon.de/liveusb/

The steps:

- Run the Ubuntu 8.04 Desktop live cd.

- Download the tool from here.

- Right click the downloaded file and click "Open with Gdebi Package Installer" (it will automatically download and install two additional packages, i.e. mtools and syslinux)