Close... You have TWRP installed already, correct? Also, the flash drive must be formated in FAT32 format, if it is under 32GB it should be that way out of the box, if it is larger, you might have to do a little trickery.
From there boot the phone into recovery (hold POWER and VOL DN until LG logo is displayed, then release and press and hold again until TEAMWIN logo comes up, it might take several tried, the timing is tricky). Then once in TWRP, go to INSTALL and change the source at the top from the Ineernal Storage to USB-OTG, you should then be able to browse to the recovery zip and flash, or browse to a ROM image and flash it.
If that fails, you may have to restore to stock first and start over... see this thread:
[GUIDE]Newbie Guide for Root/Recovery/Stock … | AT&T LG G2 | XDA Forum for more information.
EDIT: If the USB OTG is still not recognized, you can try adb sideload... install the drivers for the LG and ADB, start the phone and recovery, in TWRP go to Advanced and ADB SIDELOAD, then on your pc enter "adb sideload recovery.zip" or whatever ZIP you want to flash, it should go.