Thanks for the quick responses!!
The dongle is the only thing I have plugged into USB, on the left hand side.
If the dongle is plugged in and I just press 'on', it loads quickly. 'on->eject' it still takes 7-10 seconds, I tried holding eject until the screen came up but the 'install package' was still not there.
To be honest I'm not 100% sure it is a AT90USB162 board so maybe that's the problem. But the drivers installed fine and flashing it with Flip was OK and verified. How can I be sure what it really is? I bought it and the seller disappeared the next day so I can't ask him. From memory however, I am quite sure it was a AT90USB162 listed in the ad.
Does the 'install package' option appear regardless of whether a USB (data) stick is plugged in when successfully booting with the dongle?