Silly me. After reading about syslinux it suddenly dawned on me I was still making it too hard to transfer Ubuntu 7.10 LiveCD from CD to thumb drive. The key difference is copying all the files in the isolinux directory on the Ubuntu LiveCD to the root of the thumb drive, and renaming isolinux.cfg to syslinux.cfg. So here are simpler instructions for creating a bootable Ubuntu Live Thumb Drive under Linux.
sudo mount -t iso9660 -o loop /[location-of-iso]/ubuntu-7.10-desktop-i386.iso /mnt