I am surprised that no one was able to offer a solution!
Anyway, I figured this out and here is a solution for future Googlers:
Basically, you do not have to change anything in BIOS. If Bitlocker gives an error, you should try a different USB port. I read somewhere that you should use a USB port on the mainboard itself; however, that solution isn't complete. Sometimes not all of the ports even on the MB will work. I tried that before and it didn't work. This time I tried yet another port and it worked. I think that you must make sure that the USB port you're trying is not for USB3 or isn't colored red (for RAID configurations).
In short, use a regular USB 2.0 port in the back of the mainboard that is colored black. And if that doesn't work, move on to another port and try that. Apparently MS has some robustness issues to fix...
PS: As a last resort, also try to use a different USB Flash Drive brand/model.