The installation stick should just be a FAT volume, which is why the partition has to be less then 2GBs. It should have an ARCA_ISO directory containing the ISO and a couple of other files for memboot. Clicking the ISO should mount it.
Yes. It is. Those guys at Arca Noae do know how to make their ISOs and they do include all the needed tools to make it work so that one can INSTALL from the USB stick. This I have done. And very successfully installed ArcaOS on my X60s FROM this USB stick I have made. There is no problem.
Is the stick recognized by the removable devices widget (looks like a triangle with a line under it) in the xcentre (panel)? The fact that your install finished points to the stick being good.
Edit: If it doesn't show up in the widget, try removing it and reinserting it, if it does show up then eject it by clicking on the removable drive widget and reinsert it.
It doesn't work correctly when trying to access it via XCentre widget or by kliketi-klik in file manager (or what ever that is called in OS/2). It does show up when it is inserted when booting but it cannot be accessed. It shows up "Empty" in the XCentre as I explained earlier. I just did test your suggested remove/reinsert and it seems to not work at all. It's not seen anywhere. This is when one uses USB ports on the laptop itself.
When inserted into two ports on Ultrabase, it is recognised, but cannot be accessed. Shows up as "Empty" on XCentre. One can "Check disk" however and all seems to be ok.
But there is a twist to this!
When I open up Text Editor and browser through there it is seen right and those files can be touched like a girls in the red-light district ... So something is fishy.
EDIT: Just a moment ago when I pulled laptop off from the Ultrabase to check the model number, I tested USB stick on the USB port on laptop and it sure did seemed to get recognized, but still no cigar. Same old, same old "Empty".