USB boot: "Unknown keyword in configuration file: gfxboot"

[SEWilco]

When booting from a 4GB USB flash drive, ubuntu-10.04.2-desktop-i386.iso fails to boot.

SYSLINUX 4.01 debian-20100714 EDD Copyright (C) 1994-2010 H. Peter Anvin et al
Unknown keyword in configuration file: gfxboot
vesamenu.32: not a COM32R image
boot:

After a pause of very few seconds, the last two lines repeat.
Typing "help" but not pressing ENTER stops the endless activity.
When ENTER is pressed, the "Welcome to Ubuntu!" text menu is displayed for a couple of seconds, then the system boots the live system from the flash drive.

I am not seeing the stick man page, so I can not run the disk drive verifier. The graphical boot screen which I see has "Ubuntu" and several white/red dots underneath.

Another quirk: When in Ubuntu and I "Restart", the system does not boot Ubuntu. Instead, Windows 7 Pro boots from the hard drive. The BIOS option to give priority to the USB drive has been selected.

The system is a new Dell optiplex 980.
MD5SUM is correct on the .iso file.

Ubuntu 11.04 booted normally from this same USB drive, but that is of no practical use because the project needs the LTS version.

[Launchpad Janitor (janitor)]

Status changed to 'Confirmed' because the bug affects multiple users.