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I can download the Universal Installer (1.9.3.5) to my desktop and I can download the saucy-desktop-amd64.iso to my desktop but the installer set-up cannot recognise the file as ".iso" so will proceed.

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Can you explain some more? "setup can't recognize the file as ISO" –  Mitch Jun 12 '13 at 19:36

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Boot with an installation - CD of Ubuntu - ( you need to adjust bios to boot from CD/DVD - drive as first device ) - then you are able to install on usb !

You need to start with a CD/DVD of Ubuntu ... try to burn a CD first (nero or similiar - simply drag and drop the ubuntu*.iso-file into window of empty CD/DVD ).

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