The "dev" folder appearing is actually expected -- OSX returns incorrect Finder flags and metadata for /dev when you're booted from the drive. Finder should hide it when you restart from it, though (and it won't hurt anything).
As far as a restart goes, Ed -- it's hard to say. Usually, if it doesn't show up at Option-boot, it's because:
- The drive itself didn't spin up properly
- The drive is partitioned with MBR (or GUID for a Power PC Mac)