Booting from the USB requires BIOS support. If using a low level driver, this driver must be universal to be recognized by all OSs and applictaions to access or identify the image in the partition as booting from a cd drive.
Suppose that, USB is not working for you, the best method I can see to the best of my knowledge, is to copy the whole contents from the cd (either through expanding the iso image via 7-Zip or copying the whole CD contents into a hard disk partition. That is, if you have the space to hold all those cds' files on the partition.
The ISO image is not a much compressed format and the size will be near to the full size of the total cd contents, unless, if it's a Compressed ISO. So you might not need to worry about the hard disk space when compared to storing the ISO images.
Since the autoplay and bootable portion load up the setup file, you can manually enter the setup.exe (depending on the OS) file from the command prompt, once you have access to the hard disk partition, which will meet your requirement to initiate the installation process.
If you can create a 2GB partition, you can store a whole WinXP CD, a whole Win98SE CD, and lots of the utilities and applications, and still have space to spare.
I prefer to create a FAT32 partition, so that win9x and Dos (>/Dos 7) based systems can access the partition too.
I too, prefer to install from the hard disk partition. By this way, the installation process is super fast, and during installation of certain hardwares and re-installing or updating applications, you won't need to re-insert the OS CD, which is otherwise requested by the installation process.
As an example, one of my systems, has a storage space of 20GB (out of 160GB) reserved only for the OS CDs, Application CDs, Driver CDs and all the Utilities I install and use often.
This storage is a FAT32 partition so that both my Win2000 and the Win9x systems can access the drivers and utilites i have stored there. (Utilities - like archivers, players, registry tools, etc.)
I have placed the cds in separate directories (folders), like WIN2KCD, WIN98SECD, WINMECD, POWERARC, WINZIP, WFWG311, MSDOS622, NVIDIA, CREATIVE, etc.,etc...
I have placed this partition (using Power Quest's Partition Magic 8 ) towards the end of the drive in an extended partition.
To access this partition, I use the good old floppy drive to boot first, then change to the drive and directory and initiate the setup.