Create partition for Windows 7

You cannot install Windows via USB. Windows will not install or boot from external drives.

To use Windows 7 on the Mac on a separate partition means you must use Boot Camp Assistant. However, there are alternatives for running Windows:

Windows on Intel Macs

There are presently several alternatives for running Windows on Intel Macs.

1. Install the Apple Boot Camp software. Purchase Windows XP w/Service Pak2, Vista, or Windows 7. Follow instructions in the Boot Camp documentation on installation of Boot Camp, creating Driver CD, and installing Windows. Boot Camp enables you to boot the computer into OS X or Windows.
2. Parallels Desktop for Mac and Windows XP, Vista Business, Vista Ultimate, or Windows 7. Parallels is software virtualization that enables running Windows concurrently with OS X.
3. VM Fusionand Windows XP, Vista Business, Vista Ultimate, or Windows 7. VM Fusion is software virtualization that enables running Windows concurrently with OS X.
4. CrossOver which enables running many Windows applications without having to install Windows. The Windows applications can run concurrently with OS X.
5. VirtualBox is a new Open Source freeware virtual machine such as VM Fusion and Parallels that was developed by Solaris. It is not as fully developed for the Mac as Parallels and VM Fusion.

Note that Parallels and VM Fusion can also run other operating systems such as Linux, Unix, OS/2, Solaris, etc. There are performance differences between dual-boot systems and virtualization. The latter tend to be a little slower (not much) and do not provide the video performance of the dual-boot system. See MacTech.com's Virtualization Benchmarking for comparisons of Boot Camp, Parallels, and VM Fusion. Boot Camp is only available with Leopard or Snow Leopard. Except for Crossover and a couple of similar alternatives like DarWine you must have a valid installer disc for Windows.

You must also have an internal optical drive for installing Windows. Windows cannot be installed from an external optical drive.

You have the ISO

What Mac? get a lot of posts from people that don't have a tower.

There is a forum for Windows on Mac (Boot Camp)

And the DVD-less MacBook Air provides using USB-DVD so now everyone is trying to edit the plist to add theirs for support.

Windows can be installed from USB.

Disk Utility won't though a few have. not if you are using the same drive as Mac OS. Installing Windows on its own drive you don't need anything but you have to remove the other drive(s) (internal and external).

I guess you thought you gave us all we needed to know. Not.

Sorry, but you can create the partition without having the Windows installer disc. This is no different that in the past. But you cannot install Windows after you make the partition unless you have Windows on a DVD.

Why don't you use virtualization software that lets you run Windows concurrently with OS X, and they let you install Windows from a .ISO disc image.