I had that same problem too. I found the same information you found, and it didn't help. So i just installed it manually to my 8gb usb from an iso. http://www.slitaz.org/en/doc/handbook/install.html I added the "rootdelay=10" to the grub entry, to prevent the kernel panic, and it works great.
But I also would like to know how to make it boot from the iso. The cooking version worked, I don't see why this one doesn't.