Autorun software on the USB key may be the culprit. There was a virus that got transmitted via USB keys running autorun, and if Zach's USB key has autorun, it may be wreaking havoc with his Internet connection.
It could also be that the USB driver is corrupted and it could be affecting the network stack. If it's powered and drawing current from the system, his power supply may not be powerful enough to handle it. Try using a USB connection that doesn't draw power and see if there's still a problem. There could also be a motherboard issue at work.