the main advantage of usb sticks over cds is that usb sticks are useful for something besides holding the game. they're just a lot more expensive too
I like the idea of them (usb sticks) being usable after the game has been installed/discarded, but personally anything less than 1GB would be useless to me and so end up as more clutter in the draw/desk (like old 128MB camera cards I have, impractical in modern cameras really).
I guess usb sticks could work well made in short runs as marketing gimmicks, but for games that already have some good marketing (so folks that spot the usb stick go `oh that game - cool, must pop to the shops to buy that later`).
If folks dont know about game X, then seeing a usb stick with some name on it won't mean anything to them.
Ideally any physical media should be fully recyclable! Compost-able cds, now there's an idea