I think it is the Cisco way to make you pay for the "free WLC" since the VM essentially replaces a hardware controller with embedded licenses. I'm still rocking a 3802 with ME and 3702 subordinates....because it just works.
Anyone stumbling over this i the future - the idiot proof method of getting USB formatted is get a 1 or 2GB cheap USB, put in it a switch with a functional USB port and format usbflash0: or usbflash1:
I realize this is an ancient thread. The original post was for a 2960. This solution is for a 2960X. The 2960X (and the 2960-S)supports TFTP in ROMMON. The 2960- 2960+ and 2960G do not.