For this you will need:

1. Windows 7 DVD or install files
2. 1 x 4GB USB Flash Disk
3. a pc that supports booting from a usb device.

Follow these steps to the word and you should have an up and running USB Flash Drive that you can installing Windows 7 (or Vista) from.

1. Plug in the USB flash drive and backup the data on it (if you want to keep it). Make a note of the drive letter in this example I am going to use F:\ as that is the drive I have on my PC.

2. Open a command prompt with admin rights.  I have a short cut on my desktop that I right click on and select run as Administrator.

3. You will now need to make some changes on the USB flash drive using the diskpart tool from your command prompt.

1. Load diskpart by running the command “diskpart” in your command prompt:
   
2. run the command “list disk” :
   
3. Assuming that you only have 1 hard drive your USB flash drive should be listed as Disk 1. So follow the commands below:
4. You will need to select the disk you want to work on (Disk 1) so type: “select disk 1”
5. You then need to clean it so type “clean”
6. Then you need to create the partition primary, so type the following command: “create primary partition”
7. Select that new partition by typing in “select partition 1”
8. Set it as active by typing “active”
9. Format the drive with NTFS by the following command: “format fs=ntfs”
10. Assign a drive letter to the device by the “assign” command
11. Finally exit from diskpart by the “exit” command. However do not close the command prompt you need it for the next step
12. Here is what your diskpart command history should look like:
    

4. Copy the boot files from the install files to the flash drive:

1. insert your Windows 7 DVD in to your DVD Drive
2. From the opened command prompt type “E:” (assuming that your DVD Drive letter is E)
3. The go into the boot directory by “cd boot”
4. then update the flash drive the the Windows 7 boot manager by running the following command: “bootsect.exe /NT60 f:” again assuming that g: is your flash drives drive letter
5. here is what the command history should have looked like:
   

5. Copy all the files from the DVD to the flash drive. The easiest way I found to do that was either a cut and paste or select all files on your DVD and then right click and use the “send to” menu and send them to the removable media

6. Boot up your PC and select to boot from USB. for Dells the key is usually f12.

I am guessing that this is the same as what you would do for Windows Server 2008/2008r2 so I will be give this a try soon.