Ok, I finally got it to boot. Since I don't have a linux system, I installed Oracle Virtual Box on my Win10 PC to get a linux VM running. Once I had a linux VM up (Ubuntu 5.10 ), I connected my USB stick then did the below. Keep in mind, my linux VM identified/assigned my USB stick as /dev/sda. YMMV
1. used fdisk to partition it: fdisk /dev/sda then when prompted, pressed "n" for new partition and followed the rest of the prompts
2. then I formatted it: mkfs.ext3 /dev/sda1
3. then labeled it: tune2fs -L LIBREELEC_DISK /dev/sda1
I then disconnected the USB stick from PC, connected it to the MX2, powered up and BINGO! Kodi was up!!! Not sure why the image maker LibreELEC.USB-SD.Creator.Win32 didn't work well for me.
Also, my 1st attempt at this was with a 16Gb metal thumbdrive. For whatever reason, it would run VERY hot and it slowed Kodi down a lot, freezing here and there but usually recovering but there were a few times it hard froze. So I switched to another 16Gb thumbdrive I had (generic plastic casing). That ran without freezing, but response times were slow clicking around Kodi, waiting for pages to display.
Finally I took my 16Gb class10 SD card from my GoPro, did the above to it, booted up and was amazed how FAST Kodi now runs. I later compared the write speed on all 3. The class10SD has a write speed of almost 30Mb/s whereas the USB sticks were 8 & 10Mb/s.
So long story short, if your NAND is bad and you have to run Kodi on external memory, make sure it's fast to get the best performance out of it.
I'm really loving this 8.0.1 build. Thanks to all!!!
p.s. I can't believe my original xBox (17yrs old!!!!), xbox360, Apple TV2 (jailbroken with Kodi 14.2) are all still running perfectly with no NAND issues. Such a shame Matricom used such cheap memory on the MX2. Granted the xbox and 360 both have mechanical HD's. But my ATV2 is way older than the MX2.