I'm having the same problem. Yes, I followed the instructions completely all the way through clicking Format under advanced options for the BOOTCAMP partition. It appears to format it correctly, but when I click Next, I get the message "Setup was unable to create a new system partition or locate an existing system partition."
I read in the forums that I should unplug the USB drive. I tried that and instead, get the following message:
"Windows is unable to install to the selected location. Error: 0x80300001"
I have a new Retina display running Mountain LIon and the latest of everything. I tried installing both Windows 7 Home Premium SP1 ISO and Windows 7 Pro SP1 ISO, both downloaded from Microsoft. I am booting from a 32GB USB3 drive. I used Boot Camp Assistant for everything.
I removed my old Windows XP VM from Parallels, wiping everything. The only other thing I can think of is that my MacOS is connected to Time Machine, but MacOS is not running while Windows is trying to install itself.
Any ideas? Thanks!