Windows Vista and Windows 7 can be installed via a bootable USB drive as well. And the installation would be much easier and faster than installation via DVD. Windows Server 2008 & Windows Server 2008 R2 also can be installed via USB drive except installation of Windows 7 & Windows Vista .Initially Windows Vista/7 DVD or installation source (setup backup files stored on local hard disk) & a 4GB USB 2.0 Storage device would be required. You can follow the steps to install Windows Vista/7 from USB Drive.
1. Plug your USB storage device and run CMD and execute the following commands one after another.
Run Disk partition utility
o List disk
To get disk index that is used to perform disk partitioning.
o Select disk 1
Selects disk to perform disk partitioning.
Flush your existing all USB drive’s partitions.
o Create partition primary
Creates a partition as primary partition.
o Format recommended
Format your USB drive with recommended parameters. (No need to worry about file system format)
Set the partition as active to hold bootmgr.
To quit Diskpart utility
2. After executing the above commands simply copy all Windows Vista/7 files from DVD/Backup storage to USB storage device.
3. Change boot settings from BIOS and set it to boot with your USB drive, you can install Windows Vista/7 via bootable USB storage device. That is it.
Note: For boot problems try Fixing your USB Storage drive with the command I:\Boot\Bootsect.exe /NT60 I: where I: is the drive letter of USB storage device