I tried it with an old Kingston 8GB USB2.0 stick (smallest I had lying around) and it never worked, the console crashed every time.
Went with an Intenso 8GB USB3.0 (the smallest I could buy), no problem at all.
Or rather, I explicitly bought the USB3 because I had no spares. After a week, I somehow thought it was 16GB instead of 8, and wanted to actually use it instead of "wasting" it for JB, and thus tried replacing it with the old 8GB USB2 one which catastrophically failed.
YMMV, of course. If it doesn't work with that 128MB stick, maybe this is the problem.
You might want to disconnect any external HDD drives before trying