This is hardly rocket science, I’m mainly blogging it in case I have to find it in the future! Installing Windows 7 from USB key is a much more pleasant experience than messing about plugging an external DVD drive into your netbook…
To prepare a USB storage device as an installation source for Windows 7:
1. Connect the USB storage device to a computer running Windows 7 or Windows Vista. Ensure that the storage device has no data stored on it that you want to keep as you will wipe it. This needs to be 4gb or greater unless you have done something exciting like used vlite to slim down the Windows 7 installation files to just the ones you need.
2. Open an elevated command prompt (click Start, All Programs, Accessories, right click Command Prompt and select Run As Administrator) and type diskpart.
3. At the DISKPART> prompt, type list disk. Identify which disk connected to the computer represents the USB storage device.
4. At the DISKPART> prompt, type select disk X where X is the number of the disk that you have identified as the USB storage device.
5. At the DISKPART> prompt, type clean. When the disk is clean, type create partition primary.
6. At the DISKPART> prompt, type format fs=fat32 quick. When the format is completed type active and then exit.
7. After you have completed these steps, copy all the files located on the Windows 7 installation DVD to the USB storage device.
8. Configure the BIOS computer on which you want to install Windows 7 to boot from the USB storage device. Attach the USB storage device and then reboot the computer to start installation.