When I need to install windows from a flash drive I use DiskPart to get the flash drive ready to receive the files from the boot CD/DVD as follows:
Run Command Prompt as administrator:
select disk # (The #=number next to the flash drive, be carefull that you select correct number.(Example=select disk 4))
create partition primary
Then just copy the files from your boot windows 7 install cd/dvd to flash drive and then boot from flash drive.
This works for me. Hope this helps.