From what I could find, formatting it to FAT32 is needed so that is correct.
In this video, the person says to just double-click the file name instead of clicking the arrow on the right side Fix: Gigabyte Q-Flash "Can't Read File" (BIOS Firmware Update Fix) .
If that does not work, I found some people who said they have only had success when they use the usb ports in the back.
With regards to booting into your LM21 usb stick:
I skimmed through the manual and I only see one place where it mentions the boot order. If you have not yet tried a different usb port, I suggest doing that.
Edited to place video name on the link instead of "v".