...which can be played on a DVD Player (plays all video files). I want to gift a USB flash drive with many home videos which could be selected through a nice menu.
I believe a DVD/Blu-ray standalone player is built with industry standards capable to play DVDs and Blu-ray discs only, obviously disc's structure/filesystem meets the same same so they can work flawlessly. Conversely, standalone players are not designed to work with USB drives in such way.
You didn't mentioned BD, USB Flash drive instead. That software will work with USB Flash Drives with no problems.
It should work on USB sticks with no problems, but you have to keep in mind that by default most new Windows machines have disabled the autorun option for USB devices, so at the end you'll still have to run that executable if you want the menu to show up.
That's mainly for the Auto-Start function at the time you insert the USB Stick etc.! Just go to drive by clicking on the Drive letter in File Manager and double click on the file Autorun.exe and the Menu would show up normally! And just to note: I always disable the Autorun function in Windows!