I have tried the above steps on 2 USB sticks and get the same (1mb A500).
The X-Copy has a menu list to select programmes via F keys (stored in Bootblock?), that did seem to manage to get copied!
Is it that Track 0,0 can only be copied? If you 'verify' during formatting it fails after 0,0.
It seems the BootBlock is the area currently you can only write to.
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