Installing the image? Where? Why?
I am afraid you are adopting a wrong procedure in creating the bootable pendrive.
In step one select your pendrive and tick format to FAT32.
In step 2 select Windows Vista/7 Installer.
In step 3 browse to the location of the Windows 7 ISO and select it.
Click on Create.
Your bootable pendrive to install Windows 7 will be ready in a few seconds.
( If the downloaded ISO is corrupt, you will experience problems. If it is not a genuine ISO you will experience problems. Use only genuine software.)