I believe the problem with EZ Flash 2 not recognizing the USB Flash drive is because of the Flash Disk size. By now I am sure you have gotten your answer, but just in case others come looking: I was having the same issue; I own an Asus P5Q Deluxe and had never upgraded the BIOS and had gotten away with it for a long time, having used only Windows XP. But I recently upgraded to Windows 7 and started having stability issues (BSOD, etc), so I couldn't avoid updating the BIOS any longer. I was using a 4GB USB flash disk and no matter what I did the EZ Flash utility in the BIOS would not recognize the USB Flash Disk that contained the new BIOS version. Then I remember reading sometime back that the Flash disk has to be a small size, under 1GB for instance. I borrowed my wife's old 512MB USB stick and BAM, that did the trick. The USB popped up right away in the EZ Flash 2 Utility and I updated my BIOS. Yes, both USB sticks were formatted as FAT32, and I didn't change any of the USB settings in the BIOS before the update.
Thank you so much. I looked around for hours before finding your response. Its weird that it needs to be under 1GB