I think that if the BIOS is new enough, it can treat USB flash drives installed at boot time as BIOS-accessable (Int13h) fixed disk drives, which DOS can then access normally. That implies that they are non-removable during your DOS session though, and have to be partitioned, etc.
Some flash drives include utilities that allow them to change how they identify themselves to the system, as a USB removable/vs fixed storage device, etc.
There are also ASPI drivers for DOS for USB (generally used for external USB CD-ROM drives), and I *think* (not entirely certain), that they may support USB flash drives as well. In terms of being able to access/format them then, you would also need an ASPI-disk driver, and an ASPI-disk formatting utility.
I should really try experimenting more with this, I'm a bit curious myself. I've read that some people have been able to install and boot Win98se off of a USB flash drive even.