I recently had to install a 64 bit version of Windows 2008 on a Dell Poweredge 1850 that did not have a DVD drive and used these steps to create a bootable USB key. You can also create a Windows 7 bootable USB key using the same method for use with a Netbook without a DVD or CD drive.
Open a command prompt and type
select disk #
create partition primary
select partition 1
format fs=ntfs quick
Now we need to make the drive bootable
d: (drive letter to windows media)
bootsect /nt60 h: (the drive letter to usb key)
Once this is complete use Windows explorer to copy the contents of the media to the USB drive. On the machine you want to install on go into bios and verify that it is configured to boot from USB.