Installation From USB

This might sound weird, but here goes.

I have Windows 7 Ultimate. I'm planning to do a clean reinstall, with the help of a bootable USB created with the help of a Windows 7 USB/DVD Tool.

So, my question is, if I try and run the OS installer through USB, and if I start installing at some point, it will format my C drive (in which my OS is installed), right? Then, at that point, the system will lose the USB feature. Then how will the process continue?

When using a bootable DVD, we just put it in and let it run while switching on. Is it the same with a USB? Can I reinstall the OS, in the same drive in which my earlier OS was installed, after formatting it?

Though I'm having Windows 7 Ultimate, I'm planning to install Windows 7 Professional 32-bit.

Thanks, mate.

I've got another doubt.Currently I'm running Windows 7 Ultimate x64. I'm planning to install Win 7 Ultimate x86. I tried to do it with a USB stick (through Windows 7 USB/DVD Tool). But it says the ISO image aint valid. Is it because its 32 and the installed one is a 64 bit?

I do not have a DVD drive. What I use is Windows 7 USB/DVD Tool.
I'm currently running Windows 7 Ultimate x64.
What I'm going to install is Windows 7 Ultimate x86.
I need a fresh i.e clean install.

I have a x86 ISO file. But the USB/DVD Tool doesn't recognize it. Says its invalid. Probably some conflict over bootmanager.

What should I do?

But this was supposed to be a clean install.
And why does it say its not valid?

Nope. I'm sure about it.
I used 3 different ISO. 1 downloaded by myself and the rest 2 through friend's. And I had even used them to format and install OS in other PC's.