I downloaded the latest BIOS version from the ASUS K8N pages. (download -> select your OS -> BIOS -> Bios version 1011). The version 1011 was released in 2006, so I figure that will be the last version they will release.
Then I got the Asus Update program for Win XP, from softpedia.
First, I saved the current BIOS for backup reasons. I selected "Save current BIOS to file" and clicked Next, chose a folder and saved it as "oldBIOS.rom".
Then I updated the BIOS with "Update BIOS from file". I chose the new BIOS rom file "1011.rom" I downloaded earlier.
The BIOS Flash window.
After a short while the BIOS flashing window appeared, with info on my current BIOS version and the one I was updating into. I figured it would be safer to clear the CMOS checksum to get the default settings, in case the old settings would be somehow incompatible with the new BIOS version.
I clicked flash and crossed my fingers.
Then to reboot the computer, hoping it would boot without problems... (If a BIOS update fails and you're left with a crippled BIOS, you can say goodbye to your mainboard unless you have 1337 skillz. So be warned!)
...and it worked! I was able to boot to USB from the boot menu (press F8 at boot time to get there). However, there is no option to set USB in the BIOS setup utility boot order settings. It seems I can only boot to USB by manually going to the boot options menu every time. But that's OK with me as long as I can boot from USB!
If you have any questions, don't hesitate to ask in the comments!