These directions were posted by “Arnie” in the comments saction of www.withinwindows.com

They work great! Especially since the Microsoft Tool was pulled and didn’t work for me anyways.

An other way to create a bootable USB drive to install W7 from is:
Format the drive from a Vista/W7 machine:
CMD
FORMAT F: /FS:NTFS (where F: is of course your USB drive)

Activate the first partition on that drive:
Start DISKPART
LIST DISK
SELECT DISK x (where x is the drivenumber shown from the previous command)
SELECT PARTITION 1
ACTIVE
EXIT

Mount your newly downloaded ISO from Microsoft with Daemon tools or other mount-tool
Place a W7 bootsector on the drive:
Z: (where Z: is your cdrom drive where the ISO is mounted)
CD \BOOT
BOOTSECT /NT60 F:

Now copy all of the files of the mounted cdrom to the USB drive
XCOPY Z:\ F:\ /S/E

Now boot from the USB drive to install W7!