So how is it a no-name company in China can make a $5 USB stick no larger than the USB connector itself? How are they pulling it off? Why is it you can't make a DIY thumb drive? There has to be a way, not because it's better than a SanDisk or a Cruiser, etc...but because we can!!
Sure, you can go out and spend $5-$10 bucks on a USB card reader...but wouldn't it be cool to make your own mini "solid state drive"?
You forgot that the no-name company has a million dollars invested in manufacturing equipment and space and some dozens of qualified workers and circuit RD professionals and contracts to purchase bulk parts at cost you can't believe etc. If you can make such drive yourself for $5, that company would be able to do it at $0.50 and still make money. Your intellect alone is not able to beat capitals they own.
Using Arduino is not meant to be an alternative to or saving money on consumer electronics, it is to create things or even products NOT sold as consumer electronics, which is how and why arduino became popular.