If I understand correctly....
You used a 16 Gig USB and followed the standard instructions? Burned the ISO file in the ZIP to the USB device with the included tool?
I did a native install in a virtual computer. This resulted in the entire hard drive being accessable, as I formatted it Ext4.
You could try partitioning your USB drive, making a second partition Ext4...
Or, you could try using a virtual machine to mount your USB drive as an internal hard drive, and then running the install directed at it.
then, remove it from the virtual machine, pop it into a real machine, and you are good to go with the entire space available to android.