The Linux Mint ISO is for trying out Linux Mint, installing Linux Mint, and for rescuing your system in case of problems. You can use various programs to create a persistent ISO, but this is not supported by Linux Mint. The supported way of putting the Linux Mint ISO on a USB is this: http://community.linuxmint.com/tutorial/view/744
If you want to use Linux Mint from a USB, why do you not just install it? So have the Linux Mint ISO on a DVD or on a USB, boot from it, and then install from there to another USB. That way you will have a fully functioning installation. Just make sure you install the bootloader not to your hard disk (/dev/sda) but to your USB. Some users are worried about making a mistake, so disconnect their hard disk before doing the installation so they can be sure to make no mistakes.