This guide will show you how to create USB installation media for Windows Vista/7 & 8.
This is a 100% working guide, listing all of the commands you need to type and including a couple of screenshots so you can see exactly what is going on.
It's a tried and tested guide - I've created a few Windows USB media and they always work.
Requirements:
Please note that this does NOT work with Windows XP
Method:
1. Plug-in your USB drive. If it contains any data you wish to keep copy this off now. The process will delete all data on the USB drive.
2. Open "Command Prompt" with administrator rights. If you are already logged in as an "administrator" just open Command Prompt. If you're not a local administrator go:
Start>All Programs>Accessories - Right-Click on Command Prompt and select "Run As Administrator".
3. You first need to use the DISKPART tool to find out some information about your USB drive and to create and activate partitions on it. From the Command Prompt window type DISKPART <enter> - You will see the following screen:

Next type LIST DISK and note down the Disk Number (eg. Disk 1) of your USB flash drive. You will see from my example screen shots my USB drive is Disk 1.
4. Next Type all of the commands listed below one by one, allowing each command to finish executing before moving onto the next. The command and screen shot assume your USB drive is "Disk 1". Edit the command to suit whatever your Disk Number is.
The command required are as follows:
SELECT DISK 1
CLEAN
CREATE PARTITION PRIMARY
SELECT PARTITION 1
ACTIVE
FORMAT FS=NTFS
(The format process will take a couple of minutes to complete)
ASSIGN
EXIT
(The Exit command will take you out of the "Diskpart" tool but leave the Command Prompt window open - this is what you want as we need to use some more commands later)
Your completed screen will look something like this:

5. Open up "Computer" - Start>Computer and note down the drive letters for your CD/DVD-ROM drive and your USB drive. In my example the DVD-ROM drive is letter "D" and the USB Drive is "E". You may need to edit the commands to reflect the drive letters on your machine.
Insert your Windows 7/8/Vista DVD.
6. Go back to your Command Prompt from earlier. You now need to change to your D drive and a directory called BOOT. Do this by esecuting the following commands:
D: <enter>
CD BOOT <enter>
7. Now type in the final required command, this will update the USB Drive with BOOTMGR code - it will make your USB drive bootable.
BOOTSECT.EXE /NT60 E: (where "E" is your USB drive letter)
Your command window will look something like this:

8. Using Windows Explorer, copy the entire content on your Windows 7/8/Vista DVD onto your USB Drive. Copy everything, not just the obvious Windows directories.
9. Your bootable USB Windows media should now be created. You will now just need to change the boot priority in your systems BIOS to boot from USB devices first.
There are usually two options in a BIOS - First is "enable USB Boot" and then secondly make "USB" the first boot device in the list (other options will be CD & HD).
If your machine fails to boot from the USB device check your BIOS settings as this is almost certainly where there is a misconfiguration.