What is the version of the OSX on the DVD? If it is OSX 10.6 or higher, it can be used.
Backup your USB, if you have any files on it.
Connect the 16G USB.
Insert the Macbook DVD
Shutdown Mac, power it up and hold the Alt/Option key.
Select the DVD and boot from the DVD.
Format the USB as a Mac OSX Extended (Journaled) format. (please ensure you do not modify the internal disk in any way).
Install OSX on the USB.
Shutdown your Mac, and power it up and hold Alt/Option key, and select the USB to boot from.
Upgrade the OSX version to match the version you had on the internal disk.
Install GPT Fdisk (Gdisk).
Post the output of the following Terminal command.
diskutil list