To add a little to what jgreco said about "things we have seen" I've seen lots of people claim it was a bad USB drive and that replacing it got them "back up". Then a few days later they find out it wasn't the USB stick that was bad. The USB stick was a symptom of some bigger problem, bad RAM, bad PSU, etc.
So, assuming that everything you are saying is true and you haven't done things that many of us would consider "ludicrous" or "just plain stupid", I'm wondering if something else is wrong with the machine besides the USB stick and you just don't know it yet.
You're the second person to have an iSCSI device go raw, but the first was clearly determined to be hardware related later. Not saying that you should assume this is hardware-related, but I tend to think that the problem was NOT the USB stick. Simply reinstalling to a new USB stick and doing a config restore should have been all you needed to do to be back up, 100%. I've done it, many times, even once this week, and I can vouch that it does work that way. As for why it didn't work for you, the only thing I can say is to dig deeper into what is going on. I'm betting something else is wrong and you just haven't figured out what it is yet.