Windows 7 - Bootable Disk for Windows 7 installation

Heres the background story: I own a Dell xps M1530 with a: 2.0 ghz dual core processor, 3gb of RAM, and (currently) a 360gb 7200rpm hard drive. I have purchased Windows 7 professorial 32bit to upgrade from Vista. Not shortly afterwards my hard drive started to go so I bought a new one(better on of coarse) I want to upgrade the RAM in my laptop to 8gb and I need a 64bit os to do so. I now am using Ubuntu 64bit on my laptop until I install windows. I have legally got the installers for the 64bit version of Windows 7 professional. I am planning on using the same key for the 64bit version which after research I believe will work. Right now I am having problems installing 7. I would really like to not have to waste a DVD to install it. I used some Microsoft utility to extract the ISO to a thumb drive which, I believe is bootable in the purpose of installing 7. Every time I try loading the os from the Thumb drive I get this error message:
Error: Unknown file system
Grub Rescue
Also, the Setup.exe file for installing windows doesn't seem to run under a linux operating system even with wine.
What am I doing wrong here? Any help will be appreciated.

The error you are getting is due to GRUB corruption of your HD boot sector. You need to boot the Windows 7 installer to wipe the HD of GRUB before attempting install: SSD / HDD : Optimize for Windows Reinstallation

The most reliable method I've found to write Windows 7 ISO to flash stick is to use Ultra ISO trial version: on File tab Open the ISO, then on Bootable tab Write Disk Image, Format, Write. Boot using one-time BIOS Boot menu.

If this method fails, try Win2Flash: http://www.youtube.com/watch?v=srOoGhm-jcI

If you cannot boot flash using even these methods, or a DVD which is less trouble, then burn to CD free Partition Wizard bootable CD which will autostart to wipe the HD on its' Disk tab. http://www.partitionwizard.com/download.html

Thanks so much, it worked!

Glad it helped. Let us know if there is anything else we can help you with.