That works very shortly, I'm afraid. Modern operating systems do not (and cannot) use the BIOS USB Emulation, but instead use their own stack consisting of protected mode 32bit/64bit drivers. As ReactOS doesn't have a fully working USB stack and drivers, the bootloader (FreeLDR) might likely be loaded after which it can't find the rest of the files on the USB-connected storage device.
Besides, ReactOS is only able to cope with some kind of CD as installation source right now, not any other medium, or even ISO images or Memdisk-stored CD-ROM.
It would require changing source code, as that sourcecode is an implementation that has its own assumptions about what the installation medium will look like.