That should work.

I used a PowerBook G3 and USB Floppy drive to make a set of 7.5.3 disks.

There was something fishy about Disk copy and the "Make a Floppy" command being greyed out. I'll try to remember or figure out what I had to do. This was is OS9 mind you, as I don't think OSX can correctly write a floppy through the GUI, however osx should be able to use DD.

(http://blog.roderickmann.org/2008/03/using-dd-to-write-floppy-disks-on-mac-os-x/)

EDIT: Here is all that there is to using a USB floppy with disk copy.

(http://reviews.cnet.com/8301-13727_7-10337715-263.html)

Just needs a disk in the drive before you open disk copy.