Does the drive show up as a standard "removable disk" or does it show up as a CD-ROM drive with a CD in it (the "U3" devices did this so that they could install their software using autorun). The former is doable; the latter requires a hacked up (firmware) flash drive.
It's not hard to put ISO-9660 (what Windows calls "CDFS") onto a flash drive from, say, Linux, but I'd like to make sure it'll actually do what you want before going down that path.
Note that ISO-9660 is a read-only filesystem.