Unfortunately it only works on an ISO image purchased through the Microsoft Store,
If you have a situation like me where you have bought Windows 7 on a DVD and you want to install it on a Intel NUC which doesn't have a DVD drive this is what you do.
Open a cmd (DOS Box) with administrator privileges. Start_Run_type cmd_ENTER
Insert your 4 GB USB Drive.
Do the following and Press ENTER after each line below watching for conformation)
LIST DISK (carefully look for the capacity of the USB Drive or you could wipe your hard drive)
SELECT DISK n (where n is the Disk number of the USB )
CREATE PARTITION PRIMARY
SELECT PARTITION 1 (this is partition 1 on DISK n)
FORMAT FS=NTFS QUICK (this could take 30 minutes without quick)
on completion of format
Keep the cmd window open
Insert the Windows 7/Vista DVD and note down the drive letter of the DVD drive.
Assuming DVD drive is D: and the USB drive is G:.
Navigate to the directory where bootsect is found.
Use the bootsect to make the USB Drive bootable. This updates the drive with BOOTMGR compatible code and prepares it to boot Windows 7/Vista.
You can now put in your Windows Install DVD into the Drive). If it Autostarts cancel and the OPEN in Explorer. (My Computer)
Open another Window in My Computer for the USB Drive
Go back to the DVD drive and select all the files showing. Select ALL and COPY
Go to the USB drive and PASTE
Wait about 30 minutes again and EXIT.
Ensure the BIOS is set for USB booting.
With the USB drive still in place, RESTART the PC (press the Boot Options F10 or F12 usually, to SELECT USB Booting)
The Drive should now enable the Windows logo to start up and then the Install Options.
Other ways of doing it