It could, of course, be a bad re-master...could try another (perhaps with lighter compression?) to see if that is any better.
The other consideration is the hardware you are trying to boot on. Not only did you change the kernel version, you've also opted to upgrade it to the "pae" model. This will no boot on older CPUs if they do not support (or, do not have enabled in the BIOS) the required PAE extensions.
Additionally, have you considered using the PCLOS LiveUSB creator?