After spending 2 solid days of checking out forums and at least 20 attempts I'll detail how I managed to install windows 7 on a late 2013 27"iMac using BOOTCAMP ASSISTANT. Previously I have never encountered problems installing Windows 7 on a 2010 iMac, 2011 iMac, 2011 Macbook Pro, 2011 Mac Mini.
You will need
1) windows 7 iso
2) 8GB Thumbdrive (make this the bootable windows installation USB stick)
3) 4GB Thumbdrive for the Apple support files (step 2 of the Bootcamp Assistant)
4) USB keyboard and mouse (I used a logitech wireless combi with a USB dongle)
Bootcamp Assistant will create 1) Windows 7 USB stick, 2) Apple Support files USB stick. 3) Partition your HDD 4) Reboot from the Windows 7 USB stick to install Windows.
Once the Windows installation started, I got the all too familiar "setup was unable to create system partition" message.
Switching the USB sticks from right to left and left to right and every other combination didn't work for me.
Removing the Apple Support USB Stick meant that I was unable to use my mouse and keyboard (plugged into the USB ports) when the installation reached the part where I was supposed to key in the name of the PC/Serial number. This is because the Win7 installation does not natively recognize USB 3.0 and needs the drivers from the Apple Support USB.
My hypothesis
1) you can only stick one USB drive in the iMac during installation.
2) you need the drivers on the Support USB in order for the USB 3.0 ports to work.
My workaround:
I copied all the files from the Apple Support USB stick into the Windows 7 USB stick (root directory - didn't create any folder) so that
there was only 1 usb drive and the system was able to access the usb 3.0 drivers.
Final results: Using only 1 8GB thumbdrive that contained BOTH the windows 7 files (created using bootcamp and a windows iso.) as well as the support files I was able to install windows 7 premium 64bit on the iMac without further ado. At no point during the installation did the USB keyboard and mouse cease to function.
Note: I did not try out this installation process with Bluetooth keyboard/mouse.