RE: USB key drives

A good security policy with appropriate technology can by and large
mitigate that risk:
1. Disable boot-from-USB in the PC's BIOS and lock out users from
changing BIOS settings.
2. Use Windows group policy objects to disable USB mass storage devices.
2.1 If 2 isn't possible, deploy third party software that won't allow
certain kinds of data to be copied to the USB drives.  Said software
IIRC is smart enough to examine the data itself and not just the file
extension.  It's also smart enough to look inside zips.
3. Lock down access to iSeries data to eliminate ODBC & FTP access for
all but those who actually need it.
4. While we're at it, disable access to outside FTP and email services.
5. And don't allow CD/DVD burners.
6. And printers.  How far do you need to go?

Size-wise, you can get a 160GB platter drive that's barely larger than a
pack of cigarettes.  Example:
http://www.westerndigital.com/en/products/Products.asp?DriveID=262.  It
easily fits in a pants or jacket pocket, possibly in a shirt pocket.
Or, for more nefarious purposes, in a hollowed out paperback.

And Microdrives, which are the size of a compact flash card, are up to
8GB:
http://www.hitachigst.com/portal/site/en/menuitem.7ac4c50322419b5daa67bc
a4bac4f0a0/

Again, there's no reasonable reason for MS to not allow Flash drives.
Especially since their own SyncToy (
http://www.microsoft.com/windowsxp/using/digitalphotography/prophoto/syn
ctoy.mspx ) allows them.