I did a little digging and found the following errors output to the file
/var/log/slitaz-installer.log ...

start_installer: Wed Aug 25 15:50:56 UTC 2010
mount: mounting /dev/ on /media/cdrom failed: Block device required
missing: /media/cdrom/boot/rootfs.gz

I took a look at the /usr/bin/slitaz-installer script. And noted this clue right off the bat:
# We need to know cdrom device and kernel version string to copy files.
DRIVE_NAME=`cat /proc/sys/dev/cdrom/info | grep "drive name" | cut -f 3`
CDROM=/dev/$DRIVE_NAME

I looked further, into the mount_cdrom() funtion, and saw that it appears to validate a CD is in use, but if that test fails, then seems to assume a LiveUSB is inserted. But as the function goes on it doesn't appear to adequately validate and mount a LiveUSB from which to conduct the installation.

I've pasted the function below for someone with greater scripting skills than I to check out, and possibly suggest a fix. I'd really like to get slitaz installed on this t5700, but from a USB key. Any help is much appreciated:

# Mount cdrom and verify if it's really SliTaz CD.
mount_cdrom()
{
ERROR_MSG=""
(
echo "XXX" && echo 30
echo -e "\nCreating mount point (/media/cdrom)..."
echo "XXX"
mkdir -p /media/cdrom
sleep 1
# First try to mount a cdrom
if mount -t iso9660 $CDROM /media/cdrom 2>>$LOG; then
echo "XXX" && echo 60
echo -e "\nUsing files from cdrom ($CDROM)..."
echo "XXX"
sleep 2
else
# We may be in LiveUSB mode
if [ -d /home/boot ]; then
echo "XXX" && echo 60
echo -e "\nUsing files from USB device..."
echo "XXX"
rm /media/cdrom/boot 2>/dev/null
ln -s /home/boot /media/cdrom/boot
sleep 2
fi
fi

echo "XXX" && echo 90
echo -e "\nChecking installation media..."
echo "XXX"
sleep 2
) |
$DIALOG --title " Mounting cdrom " \
--backtitle "$BACKLIST" \
--gauge "Preparing the installation media..." 18 70 0
# Exit with error msg if no rootfs.gz found.
if [ ! -f /media/cdrom/boot/rootfs.gz -a \
! -f /media/cdrom/boot/rootfs1.gz ]; then
ERROR_MSG="$MOUNT_CDROM_ERROR_MSG"
error_message
echo "missing: /media/cdrom/boot/rootfs.gz" >>$LOG
exit 1
fi
}


Monongahela

http://doc.slitaz.org/en:handbook:installation
SliTaz Installer/Install Type

# mount -o loop slitaz-3.0.iso /media/cdrom

That worked. Thanks.

Alternatively, if you know where your drive is mounted....

mount /dev/sdb1 /media/cdrom