I have sorta done this,
1. write embedded image to CF card, try to boot from card in USB to CF card adapter
got blinking cursor of death.
2. open CF card with hex editor and replace the first 446 bytes (1BEh) of the
MBR with the MBR found in /boot/mbr on the freebsd 8.0-RELEASE-i386-bootonly.iso
CD. that fixed the boot
I also just tested installing from the pfsense cd to a usb thumb drive
after install finished and booting from the USB drive, I made it to setup
network interfaces, so I think it will work.
EDIT:
I wrote pfsense 1.2.3 embeded release to the thumb drive, when booting from it
I got the blinking cursor of death, so I replaced the mbr with the mbr found on
freebsd 8.0-RELEASE-i386-bootonly.iso /boot/mbr with a hexeditor then I was
able to boot and get to the config network interfaces screen.
you can also decompress the embeded image and delete the first 32,256 bytes
from the image and write it to your drive, which seems to work also.