After checking out those logs, my suspicion is that your USB drive might be MSDOS-formatted
You are right, I didn't think to mention that before, but yes, it was indeed FAT formatted.
There should be a fifth log file called "USB Disk Log", either on your boot volume root or in your System Folder
I cannot find such log anywhere on my HDD :/
Format your current GOODRAM to HFS+ and see if it fixes it
That's exactly what I did - I formatted my thumb drive to HFS+ on Tiger and well, it made a difference. I attach the logs below.
Right after booting OS9 the whole system freezes for around 30 second, then I get the message shown in
USB unreadable 1.jpg and
USB unreadable 2.jpg.
When I try formatting my thumb drive with Mac OS Standard, I get the message shown in
Mac OS Standard.jpg.
When I try with Mac OS Extended, I get the messages shown in
Mac OS Extended 1.jpg and
Mac OS Extended 2.jpg. Then it proceeds to
Initialize.jpg but there is no progress going on, the whole system freezes.
Soo, in conclusion, you are definitely onto something here.