SOLVED! You Can’t Install Windows On A USB Flash Drive Using Setup
Usually, the error "You can't install Windows on a USB flash drive using Setup" indicates issues in the Registry and to resolve it, you should make use of Registry Editor to apply changes to the Registry. In addition, it won't hurt to consider tweaking the active partition. Don't know your way around Windows and can't perform the fixes by yourself? In that case, our guide can show you what must be done.