I have copied what I hope are the relevant files from the latest release (0.1.10) and do not have any more problems with it. Strangely, none of the previous releases contain the offending line with 'count=1'. My version number of usb-creator is 0.1.16 (Jaunty).
The problem I mentioned above seems to have been fixed some time ago. Version 0.1.3, released in September 2008 uses
popen(['dd', 'if=/dev/zero', 'of=%s/casper-rw' % target, 'bs=1M', 'count=%s' % persist]).
I have copied what I hope are the relevant files from the latest release (0.1.10) and do not have any more problems with it. Strangely, none of the previous releases contain the offending line with 'count=1'. My version number of usb-creator is 0.1.16 (Jaunty).