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When you boot your system to Ubuntu as we have done above, plug in your USB stick and go to System → Administration → USB Startup Disk Creator. If you do not see your Ubuntu CD in the upper box, select the ISO file you downloaded to your hard disk. Then, at the bottom, you will see a menu which says “When starting up from this disk, documents and settings will be:” Now, select the first option, which is “Stored in reserved extra space” and take the slider to the right. When done, click on the “Make Startup Disk” button. (I did not have an Ubuntu ISO ready so I used another ISO file that I had available. Don't let the screenshot misguide you.)
When the program finishes, you will not only have a full-blown operating system but also a space that this operating system recognizes as a storage space. Shut down the computer, take out the CD from the tray when prompted, leave your USB stick in place and reboot. Go to the BIOS settings and select USB disk (or removable drive) as the primary boot device. If you have done everything successfully, your computer will boot from your USB thumb drive.
Why did we select the USB drive method when we had the CD running smoothly? First, the CD would not let you save any changes. For example, if you created a simple text file, you could only save it to your computer (your Windows drive). Second, a CD always runs slower than a USB stick. Third, you cannot have a full-blown operating system including a storage space with a live CD. To put it shortly, it deserves the pain that we went through.
By booting from a USB drive, you can update your system, save your documents, make changes, install/uninstall software, meaning that you can do everything as if you installed the system to your hard disk.