The install folder is unzipped, and is called "install" with the contents seen in the attached image?
The USB thumb drive - what size? formatted to FAT32 with just one partition?
In most cases that I've seen where something like this is happening, the issue has been that either the folder has something wrong (contents somehow changed, or the zip file is being loaded and not the unzipped folder) or the USB drive has something wrong (formatting, or occasionally just a bad USB).
One possible troubleshooting: try a fresh USB, and try formatting it using a different computer.
The good news: the firmware will "check" to see if there's an install folder on the USB drive, and proceed with installation, so you should be able to create a fresh USB with the install folder, insert it, and have the installation proceed normally.
Also, just to be sure: the installation of the LibraryBox customizations can take awhile...5+ minutes, sometimes more depending on the speed of the USB drive in question. So if you don't immediately see a LibraryBox SSID, don't freak out...the router will reboot twice during the processes, and the lights on the router will flash until the install is complete. Just give it a bit. :-)
Hope this helps...if it doesn't, let me know and we can go through the steps more discretely.
Jason