Mentioning my SD experience, I forgot to cover the game disc fun:
So Mech Assault works for one - and *only* one exact version. The serial number on the inner disc has to be "#MS02301L". The one I bought was not a Platinum edition, but the serial number was "#MS02308L". Only the very first run...
I don't have any < 8gb drives, but my GF has 4 of the things. 1 2gb, and 3 4gb. None of them work. An OCZ Rally and two other 4gb(all ocz). Plus a "sandisk" that I suspect is an Ebay fake. But anyway, they all show up in the XBox, but it says the same thing "The memory unit you inserted isn't...
A possible solution if you don't have a working USB drive:
A lot of people have had luck using "DriveDroid" on Android phones and emulating an 8mb card(apparently the 64mb one messes up).
This is what I did since I have no < 8gb drives. It requires a rooted phone.