- I don't run Linux, and have no operational guidance for managing diskette use on that OS. I have no idea if /dev/fd0 is the correct device. Perhaps a Linux user who still has diskette drives will post.
- I/O errors are indicative of hardware problems, whether because you are using ancient media or because of drive problems, I cannot determine from the information presented here.
Since you have stated that all other media options (other than PXE) have been explored and have failed, I have questions.
- Is it possible this is a 32-bit only platform? (If so, then that might explain both USB disk and optical failures.)
- If it is a 64-bit capable platform, why has optical (CD/DVD) failed? What was the failure?
- If this system cannot boot USB devices ... are you sure that it is PXE capable? (If not, then deploying a PXE infrastructure would be a wasted effort.)