Google Chrome OS requires a 4GB USB stick. If you need a smaller version, check out Diet Chromium OS which need only 1GB. From the Yahoo article:
Many of the builds thus far have been targeted at specific hardware configurations, such as one made available by a Dell employee designed for the Dell‘s Mini 10V netbook.
The Diet Chromium build has a smaller footprint, but promises wider hardware support. Diet Chromium comes courtesy of a UK student and programmer known as Hexxeh. Hexxeh explains that he constructed the build in order to “fill a gap that hadn’t been filled.” His Web site offers instructions on how to install the lighter Chromium build on Windows, Mac and Linux machines.
Ian Paul will show you how to install a more standard build of Chrome OS right now.