You'll need to reproduce the steps you used to get the installer booting to the hdd... If you are running legacy_kernel to boot your system, that kernel needs to be on the partition you are booting too.
"VMware Workation Lion GM image" is not a supported lion source. Please use a legitimate copy of Lion.
Although the error you mention sounds like you may have a problem with corruption on your usb... See this thread for details:
viewtopic.php?f=9&t=66