Thanks for confirming the problem. I'm now working with VMware's Tech Support on this; I'll post our findings as soon as there are some.
I pursued exactly the same route as you're suggesting, except, since I didn't have a USB key that was big enough, I copied the installer to a disk image. I got that to work, but the VM was not able to boot off it. So I might just have to go out and buy a bigger USB stick (16 GB minimum), and do exactly what you're suggesting... unless you have the material to do that experiment?
