Ok so I grabbed a spare 16GB USB stick of my bench, then fixed it up just the way you want it.
I created partitions, (first) FAT32 | (second) EXT2
Using coreplus installer, installed core + X/gui to sda2 and voila! booted right up
knowing that pictures speak a thousand words
If required, create partitions on USB drive using gparted & e2fsprogs (downloaded and installed to the currently booted coreplus filesystem just for the task)
1. delete previous partition(s)
2. create partition table > from Device menu, select "Create Partition Table" (Note the warnings, eg; be sure you have the correct drive selected)
3. create partitions as required
TC-Install selecting sda2 (second partition previously formatted with ext2) with these options
nothing more than this (no extra boot codes, only x/gui applications for a desktop),
continue using forward arrows then finally the "Proceed" button to complete
Unnecessary but to show the partitions with completed install,
I opened gparted once more then selected the USB thumb drive to verify desired results
To the best of my knowledge I did not make any other install selections. Also the above operation took 15 minutes tops (actually took longer to post the screenshots).
Note we have a FAT partition available to transfer doc's etc. etc. Additionally, with a FAT partition created first on the removable drive, Windows will not complain about the ext2 partition every time you plug in the drive
reboot, then select your USB thumb drive from the BIOS boot menu.
ok here is the finished product, installed to USB drive complete with tce directory which booted up without issue
good luck