It could be the external cases you are using don't have the oxford chip in them.. I always buy my stuff from OWC as I know its a no brainer it will work on any Mac...
But even a USB stick I have been able to get booted from within Open Firmware.. You are familar with the open firmware method?
Make sure your USB flash drive is formatted as APM.. you know this already.. Then go into open fimrware and type: devalias.. Look for "ud". When you see your device.. then type the following..
Assuming you have Leopard as a backup on the USB flash drive.. type: boot ud:,\\:tbxi -- This should start the booting of the device.. As for hitting option key to get to start up manager.. I think Apple crippled the firmware on machines with USB 2.0 ports, but my Pismo which is 1.1 sees all drives even my flash drives when I hit option key for the manager.
Weird.. sounds like a firmware cripple to me.