Here's how to make a bootable USB flash drive (thumb drive) on Windows XP without using a floppy disk.
Download Virtual Floppy 2.0.
It should create a virtual floppy called drive b. Open up My Computer, right click on drive b, and select Format. Select the option to create an MS DOS startup disk.
Open a dos prompt (run cmd) and cd to the mkbt directory, wherever you put it, i.e.
> cd mkbt/mkbt20/
Copy the bootsector from b: to a file:
> ./mkbt -c b: bootsect.bin
Format the flash drive to FAT 16. In My Computer, right click on the Flash drive (mine was F:) and select format. Use FAT, not FAT 32.
From the dos prompt, copy the bootsector image to the flash drive:
> ./mkbt -x bootsect.bin F:
Make sure you get the drive letters right. Finally, copy all the files from b: to f:.
The flash drive should be bootable media now, with plenty of space for extra files you might need for doing BIOS upgrades and such.