I had to search all over for this information, so I stole a little here, borrowed a little there, and made up what I couldn't find, to get it all in one place.
Hopefully, this will save everyone some time.
First, this is PE version 2.0, and earlier versions will not work. I do not/will not work with BartPE, so I haven't a clue what needs to be done in that environment.
Your USB and the port it is using must be USB 2.0. I don't know if USB 1.0 will work slowly, or not at all.
I'm assuming you've created a bootable PE Version 2.0 CD.
I used the drive letters that my computer assigned to the devices. Yours may be different.
C:=local hard drive
E:=USB Thumb drive
X:=PE's RAM disk
You need to assure that you select the proper disks, as you will be erasing and formatting the thumb drive. I will not be responsible for any data loss or woes you encounter!
You'll need MagicISO, to extract all folders and files (including hidden files) from your CD to a file on your C: drive (I used c:\bootusb)
(You probably already have these files in a folder, somewhere... you needed to use them to create the ISO. If not, extract them before you boot the PE CD).
Boot your PE version 2.0 CD
type these commands:
select disk 1 (this was my USB drive. type in "detail disk" to be sure you've selected the USB drive)
clean (you are erasing the selected disk. I hope you got it right!)
create partition primary
select partition 1
format fs=fat32 (this takes a while)
You're now back at the command prompt, and need to copy the files from the folder you created on your hard drive to the USB drive.
xcopy c:\bootusb\*.* e: /h /e (this also takes a while)
You can't copy the files from the RAM drive, as they're in use by PE
I don't think (but haven't tried) you can copy them from the CD, as they're compressed... (?)
Good luck, and I hope to have saved someone a bit of trouble figuring this out.