I think that you will need to install from the alternative Xubuntu ISO. I
suspect that your drives were not detected due to some sort of error in them
that kept them from mounting properly, but that is only a guess. You might
want to format the drive first and see if that makes a difference. There is
a Linux distro called Parted Magic that you can install to the USB key the
same way that you installed Xubuntu. It is made to handle partitions and
drives. You can format, partition, label, move, etc. Once your drives are
set up then you can try Xubuntu again. Xubuntu has a built in partition
editor, but working from the alternative CD in text mode may be harder for
you.

I don't know what to say about your USB key. I have has several go down over
the years and it is a frustration to be sure. Always make sure that they are
finished writing before removing them. Sometimes in haste we forget in our
impatience. These things are never convenient, but they seem to happen when
we are in the most need and consequently in the biggest hurry. That is my
confession for today. I don't know that there is any way to fix them. :)