sure, but as stated by others usbflash is an option and can be formatted for use. you would need a small usb flash drive, something like 64MB. I am not sure if Gig drives are supported in your ROMMON version.
I don't think the issue is whether the router can download IOS image from either TFTP server or USB Compact Flash drive. The issue is the router's inability to have local access to IOS either through Compact Flash (flash: slot or bootflash: slot) or USB port (usbflash0: or usbflash1: slot) which any normal 2800 series router should have hence the reason of having the entire router RMA
DING! DING! DING! If the router's flash drive is faulty then there is a chance that something else may also be faulty and therefore the router can't be trusted.
Before I RMAed the box I was trying to see if it was simple fix and I thought that maybe the strange Confreg was something someone else had seen before. -- I do not, have not, and will not work for AT&T/Comcast/Verizon/Charter or similar sized company.
Even if that works it's not an option as I am not going to send a router into the field with a work around. -- I do not, have not, and will not work for AT&T/Comcast/Verizon/Charter or similar sized company.