On my flashdrive, I have Crunchbang 11 installed. It's lightweight, easy to use, and quick to boot up. Since there aren't many processes running because it is made for simplicity, it doesn't overheat the flashdrive or motherboard very fast, which can be an issue sometimes. You can also use the rest of the flashdrive for storage, since the .iso and system files only take up about 600 MB. One thing to consider is that if you want to boot it up on other computers, they need to have the correct processor.

It also uses apt-get, so you will feel at home if you already use ubuntu.