I don't think the custom firmware kills the usb copy per-se. If I remember correctly, the watchdog application polls for the copy button being pressed. If you're killing watchdog within rc.local, this could be your problem
FWIW, it's pretty easy to write your own program to do this. Simply use a shell script to poll the state of '/proc/miscio/gpio_6' looking for it to change from '0' to '1'.
- K.C.