Here's the simple steps I took to get it to install easily:

1. Format an entire thumb drive to the FAT32 file system using a partition editor like G-Parted (I loaded the Gparted iso into VMware and mounted my usb thumb drive after booting).
2. Copy the /boot and /BT3 folders to the thumb drive.
3. Restart the PC, and boot Backtrack 3 from a burnt ISO on a CD.
4. Once Backtrack is booted, insert the thumb drive, open a terminal and browse to the /mnt/(your thumb drive)/boot folder, then execute ./bootinst.sh

DONE!