I rarely post, but I can confirm that USB Loader GX and your ISOs can reside on the same partition. I have been running all of my apps, emulators, WBFS (for Wii), extracted ISOs (for GCN), and my NAND emulation all from a single FAT32 partition at 32k for as long as I can remember without issue. Just make sure you are running the latest GX Loader, cIOSes, and set your paths properly in the master settings ini (xyz:\config\GXmaster.ini....I believe? Been awhile since I mucked with it) and you'll be golden.