I know this is an old thread, but I was also wondering how to do this and figured it out.
Format your USB drive as NTFS (also make sure the partition is marked bootable)
Mount your Windows 7 ISO and copy the files to the USB drive
Download
ms-sys
Install it
Code:
tar xvf ms-sys-2.1.5.tar.gz
cd ms-sys
make
make install #as root
Write a Windows 7 MBR to your USB drive (as root)
Replace 'X' with your USB drive letter
You now have a bootable USB Windows 7 installer