Confident that I could restore the ONEt+ from the Elonex recovery image, placed on the root of a Veho 4GB SDHC, I completed trying all the available formats on a USB stick. Because I had already tried so many, and before I restored any of the data files or installed additional programs (Xterm etc) I wanted to be sure that I had tried everything on USB that I could.
I've got 3x 1GB, 2x 2GB, that I no longer use (and 2x 4GB that still get some use).
By far the fastest of these in the ONEt seemed to be a Silver Pearl 1GB - a 9GB DVD, transformed to QVGA avi @15FPS, 128kbps stereo sound, played smoothly straight off this USB stick formatted fat16.
It's a not a good idea to format USB sticks too much, they have a limited life. It's also best to leave them fat16/fat32 because formatting NTFS concentrates on re-use of memory areas, rather than spreading use out more over the whole memory. But I formatted the 1GB & 2GB sticks as fat16, fat32, NTFS, and under Linux to ext3. The ONEt+ could read and write to all these formats, but wouldn't install the recovery image from any of them. (It also helps that I've three desktop PC's running with memory card reader/writers - as well as a laptop; the desktops have been kept because they all have two or more TV tuners each, another story)
So the empirical evidence is that trying to install the current Elonex recovery image from a USB stick, doesn't work.
This doesn't mean that a future recovery image also will not work, from a USB.
But it should save a lot of time and frustration to others, who are trying and failing to attempt install the current recovery image from USB.
It's a reiteration, but the current Elonex recovery image only works off an SD or SDHC card (but not an SD MMC card).
I also tried using a Kingston 512MB MMC SD card, formatted fat16 + fat32, with odd effects.
The card appeared to be recognised, showed up in the file system, but could not be read or written to.
However, it did not appear as loaded in the tray icons, and the WiFi tray icon disappeared too, although WiFi could be started manually and worked.
No idea why, and needless to say the ONEt would not run the recovery image from this MMC SD.
It would help others, if people who successfully install the Elonex recovery image, post here the make, model, size and format details of the card they used.