The option is not found in the boot menu. You need to go beyond that and boot the Live CD. Once you have Puppy running, there is an option to "Install Puppy USB drive" in a sub-menu of the Start menu. I think it is in the Setup sub-menu. Edit: Oops, Raven beat me to it while I was typing. :)

I am a complete Linux newbie and this is my first post here, but I had this same problem with the new Puppy Linux version earlier today. I burned my own Live CD and then tried to create a bootable USB flash drive from the menu inside Puppy. My USB flash drive is a new SanDisk 512MB Cruzer Micro. The ...