I have used a Kingston MicroSD 1GB for system recovery successfully. Contrary to the manual, you don't need larger than 1GB flash disk. As shown, the actual space required to store the image file is less than 876 MB since I have other files on the flash disk as well.
In fact, I can use the free space left on the flash disk in Windows XP to store my documents and temporary files. Contrary to the manual, you don't need to format the flash disk back to Windows format for use in Windows XP.
To start recovery, you just need to set the BIOS to boot from the flash disk.