I was wondering if you know of a way of creating a Windows 7 USB installation disk on Mac OS.
Here are the steps to be performed on Mac to create a Windows 7 USB Bootable Installation Drive.
(Note: The sudo dd command executes for around 40minutes, depends on the USB port and drive)
If you have access to a different Windows box, try the tool from Microsoft here. There are also manual instructions here. I don't know of any way of making a windows-bootable drive natively in Mac OS X.
I've recently been through this. No matter what I did, I couldn't get my MacBook Pro (can't remember exactly how old it is, but it identifies as "MacBook Pro 3,1") to boot a Windows install disk off anything except the internal SuperDrive, which unfortunately is broken. I tried more things than I can remember, including external DVD drive, USB key, USB hard drive, Firewire hard drive, EFI bootloaders, etc etc etc.
In the end I managed a hack using a trial version of Parallels Desktop - instructions here. If you have a different model Mac to mine, you might find rEFIt helpful - it's an EFI loader that you can run either from your hard drive or a USB key that should hopefully make the experience of booting into the windows install a bit easier...