"file ./live/filesystem.squashfs failed the MDS checksum"

I think I have identified my USB drive from dmesg

[ 0.000000] Kernel command line: BOOT_IMAGE=/boot/vmlinuz-3.4-9-rtai-686-pae
root=UUID=d6024873-2470-49d1-992d-a484c0ca8fdf ro initrd=/install/gtk/initrd.gz
lapic quiet rootdelay=5
[ 2.660091] usb usb1: Product: EHCI Host Controller
[ 2.660093] usb usb1: Manufacturer: Linux 3.4-9-rtai-686-pae ehci_hcd

Dell Optiplex 960. /proc/cpuinfo
Intel(R) Core(TM)2 Duo CPU E8400 @ 3.00GHz

Parallel port. The md5sum test passes.

I have backed up everything.
/proc/meminfo MemTotal: 3071164 kB

Are you telling me that upgrading past 2.7.15 may not work?

Yes he is, do not upgrade unless there is something you absolutely need.
If the machine is working properly, NEVER upgrade. This is not MS windows.
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I have several (roughly 10) machines using Ubuntu 8.04 and 10.04, all over 15 years old, all still working every day.

It appears the core problem is that 2.9 requires a 64 bit processor and my antique is a 686. I guess I will be staying in the past untilll I buy a new desktop.

The E8400 is a 64 bit CPU.

en.wikipedia.org/wiki/Intel_Core_2

If you really want to upgrade, first thing I would do is boot the latest Linuxcnc image, run latency-histogram --nobase if you get under 100ns latency, rather than upgrade your PC get a mesa 7i92, it will plug into your existing breakout board and start making chips.