How to Make a Bootable USB Flash Drive Windows XP/2003/Vista/2008/7 Installer

Installing an OS using USB flash drive rather than the standard optical disk drive has its advantages. It's fast, durable and reusable. A great use for Netbooks and PC's/Laptops without (or with busted) CD/DVD drives.

You can use command-line to transfer Windows setup into the USB flash drive and make it bootable. It's not at all hard but it's a bit tricky, so to help you save time is an application that automates it all with just a few clicks of a button – WinToFlash.
From WinToFlash.com:

WinToFlash is a software for transfer your Windows XP, Windows 2003, Windows Vista, Windows 2008, Windows 7 setup from CD or DVD to USB in some mouse clicks. This is about you can install your Windows from flash drive, USB pen, HDD, etc to your computer or netbook.
WinToFlash starts a wizard that will help pull over the contents of a windows installation CD or DVD and prep the USB drive to become a bootable replacement for the optical drive. It can also do this with your LiveCD.
You don't have to worry about scratches on the disc or misplacing your original media discs once you transfer their contents to the flash drive. The optical drive is quickly becoming a thing of the past, especially in office environments, as media is shifted to the cloud.
What you need:

• USB Flash Drive. 1GB for Windows XP/2003. 4GB (or more) for Windows Vista/2008/7.
• Microsoft Windows XP, 2003, Vista, 2008 or 7 CD/DVD installer. For image files (like iso, cue, etc.) you'll need to mount them on a virtual device. You can use DAEMON Tools Lite (free).
How to Transfer Windows XP/2003/Vista/2008/7 Setup Into USB Flash Drive Using WinToFlash
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1. First, download WinToFlash here:
WinToFlash - Install Windows From USB - Download Page
2. Open up the downloaded file and extract its contents into a folder.
3. Go to the folder and click wintoflash.exe.
4. In the Welcome tab, click the big check sign – Windows Setup transfer Wizard.

5. Click Next.

6. In Windows files path: click the Select button. Navigate and select the drive/folder that contains either Windows XP/2003/Vista/2008/7 setup files. (or you can just simply type the path letter in the textbox)

(Note: I'm using Windows 7 for this demo)

7. In USB drive: click the Select button and select the USB flash drive. (or change the path letter)

8. Now click Next >.
9. Select "I Accepted the terms of the license agreement" then click Continue.

10. In Format warning click OK.

WinToFlash will now cook Windows setup into the USB flash drive. Don't remove the USB device. Wait for it to finish.
11. When done click Next > then click Exit.

It's done. You now have a bootable USB flash drive Windows installer.
(Optional) How to Boot and Install Windows From USB Flash Drive
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1. Go into BIOS SETUP UTILITY -> Boot -> Boot Device Priority.

2. Then change the Boot Device Priority sequence, making Removable Device as the first priority.

3. Save its settings then reboot. I'll now boot Windows setup from USB flash drive.