It is possible to copy Windows 7 images to a USB flash drive and install Windows 7 onto a PC from it. This also applies to the Windows Vista, Server 2008, Server 2008 R2, Windows 8 and Windows Server 2012 product families.
The simplest method is to copy the DVD files or extract an official ISO. It is also possible to use the Microsoft Deployment Toolkit (MDT) to customize an image and deploy this via USB drive.
End users could use Windows 7 USB/DVD Download Tool. Please ensure that the USB flash drive has a minimum capacity of 4GB.
This process will prepare the USB drive for the Windows 7 disk files. In normal Windows GUI format tool, the Allocation Unit Size must be set to 4096 bytes. This works with some USB drives and fails in some USB drives. Therefore, diskpart is used.
Please note: This will delete all data on the drive, so ensure all files are backed up before continuing.
Once the disk is formatted and prepared, you can copy the Windows 7 installation files onto the disk, whether this is from the DVD, ISO or a modified image.
Video on how this is done on Edge -
Use a USB Key to Install Windows 7—Even on a Netbook -
Here you can download the USB/DVD tool -
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Very concise and easy to understand.
If adding a customized wim file that is greater than 4gb. then the usb should be formated ntfs.