I have created a USB stick with a persistent Ubuntu 16.04 (release version). I tried a couple of ways, using Startup Disk Creator and MultiSystem, but I get the same end result.
When I boot into the USB and do 'apt-get update', all is well. When I try 'apt-get dist-upgrade' I get:
** (appstreamcli:2761): CRITICAL **: Error while moving old database out of the way. AppStream cache update failed.
The only reference to this error message I can find is https://bugs.launchpad.net/ubuntu/+source/ubiquity/+bug/1561472 but would appear to be fixed, at least fixed by the time the release version of Ubuntu 16.04.
Aside: I want to test Unity8, which includes installing software. I don't have a spare computer, so I thought a persistent USB would do the trick.