That tool is for the Windows 7 installation ISO only, and sometimes will only work if it ISO is downloaded from MS.
In your case I would download the Repair CD ISO here: System Repair Disc - Create
Then burn to CD by left clicking the ISO to use Windows Image Burner which is fine in Windows 7, or use ImgBurn at 4x speed.
If you need to use flash stick, best method I've found is to install Ultra ISO trial version, on File tab Open ISO, on Bootable tab Write Image, Format, then Write.
Here is how to copy out files using Repair CD: Copy & Paste - in Windows Recovery Console
Or use Paragon Rescue CD: Rescue Kit Free Edition | PARAGON Software Group - free partition software, hard disk partitioning
Dragging and dropping is always the best method unless you're backing up on a schedule and want incremental backups of only what has changed. Otherwise you get way more than you want.