Snow Leopard 10.6.8 is as high as you can run without issues.
As far as prepping your USB so it works you’ll need to reformat it to GUID and Journaled file system. As you need to be able to boot from it as you’ll need to install Snow Leopard on your installer drive first then copy over the installer to it. That way you can boot up your system using the USB installer drive and run the installer. Newer releases make this a bit easier as now you can run it off of the mini OS that the installer has within it. Here is the link to the OS: [https://www.apple.com/shop/product/MC573Z/A/mac-os-x-106-snow-leopard|Apple - Snow Leopard ($$)] If you still have your grey OS install CD’s then you can install that release of OS-X and then upgrade from the Apple download site: [https://support.apple.com/en_US/downloads/macos|Apple downloads] this can be a painful process ;-{ Otherwise see if you have a friend who has the needed CD.