Thank you for the suggestions! It's a 16GB pendrive. I started formatting it with Windows 11, using the whole available space. Formatted to FAT32, 1st using the default 4096 byte sector size - I got a warning message during boot - "sector size mismatch" or something like that. After checking around, I read I should use 512 byte as a sector size, so then I created a 512MB partition and used that sector size - it was unsuccessful. Then I tried to partition / format the pendrive to MBR/FAT32 with Kubuntu (using Kubuntu Partition manager) - there was no warning message anymore and I reached to the point I described in the very 1st post. I will buy a pendrive with smaller capacity and try that.

Cheers,
Jeno