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First check your driver version. Latest one is available here: http://downloadcenter.intel.com/Detail_Desc.aspx?agr=Y&ProdId=1766&DwnldID=8668.
Your problem loading driver from USB floppy seems related with http://support.microsoft.com/kb/916196. Only several brand/model of USB floppy drives are supported during Windows installation. This is OS limitation.
To workaround this issue, try this one: http://www.intel.com/support/motherboards/server/sb/CS-026606.htm, or slipstream the driver into your installation CD. There is a step-by-step demo here: http://www.intel.com/support/motherboards/server/sb/CS-029550.htm.