There are tons of blog posts on the net about how to make USB bootable key with Windows 7. Here is how I prepared my 4GB USB key with Windows 7 for installation on my netbook;

To follow this recipe you’ll need:
– Windows 7 or Vista PC (not XP!)
– 4GB USB key or larger
– Windows 7 DVD (or ISO image with some ISO mounting tool, such as Virtual Clone Drive)

STEP 1) Prepare USB key with diskpart (make sure USB key is empty)

Open command prompt with Administrator privileges and start diskpart, then execute steps in similar way as they’re shown on picture:

STEP 2) Copy files from Windows 7 DVD to USB key

Let’s assume your USB key got letter G: and your DVD is mounted on R:, open command prompt and copy files with xcopy:

STEP 3) Optional – rename ei.cfg file

If you rename (or remove) ei.cfg file from sources directory then Windows Installer will give you a menu from which you can pick a particular Windows version (Ultimate, Professional, etc.) that you want to install.