http://www.intowindows.com/install-windows-7-on-usb/
Found this. Says you can do it using Virtualbox portable. Have done it so, can`t confirm. Might be worth trying.
I installed Windows XP onto mine for a kick only a few months ago.
If you set the USB drive to be a HD instead of AUTO then depending on both teh USB Drive and the Mobo, it might go.
The snag with Win7 is that it needs to setup ( Not entirely true ) an extra little partition and most flash drives dont do partitioning.