Comment 21 for bug 1489855

There is a workaround for avoiding this bug when creating such pen-drives. You should create three partitions : 1) A fat32 formatted 350MB for storing 'boot' and 'EFI' folders, 2) An ext4 formatted 2GB for storing the rest of Ubuntu's ISO content & 3) An ext4 formatted and labelled as 'casper-rw' in whatever size remains available for persistence. Finally enter 'set root=(hd0,2)' (without single quotes) in grub.cfg and the drive starts working as per your wishes.

One could do the same even with two partitions, provided they were ready to use the ISO file itself instead of its extracted content. I've described all this in my blog post linked below. Remember, this is a layman's perspective, and written by gathering information through a trial and error approach, so kindly don't expect any technical explanations for whatever I've been able to list down there...

http://proaudience.com/2017/09/creating-ubuntu-pen-drives-with-persistence/