I so far have still to try that one out! Since the RCs I simply have been working with the UltraISO program mentioned in the create installation key guilde for 7. USB Windows 7 Installation Key Drive - Create
That also works well for a variety of other things like writing GParted and live distros to flash drives as well while the MS is a bit limited lacking a format option.
Oh yes sometimes you have to use the format option in the UltraISO program as well to prep it for the write. But that can also be used to extract and then write the setup files from the 7 install dvd to the flash drive making that the bootable installation device.
Besides the right program for the write to usb the creation of a bootable ISO from the 7 installation files is another guide. Bootable ISO - Create from Installation Files