Yes it is known issue and USB ports will not work properly on PCquest linux since it uses a slightly different kernel from Fedora Core 3. I would suggest that you should always stick to the kernel that stable Fedora core uses in this case the kernel version that shipped with fedora core 3. You can burn 4 cd's and install Fedora core 3 USB should work properly there.
Also when you want to update any package make sure you update it only from the fedora core update site based rpm or a generic rpm for i386 or i686 or for Athlon in case you are using AMD ( By the way I am using AMD Athlon XP 2600 with 1 Gig of RAM )