Only Windows Enterprise licensing (officially unsupported on Macs) allows an external Windows installation. The file too large error is because your source Windows ISO is corrupt, which happens very frequently when downloaded over wireless connections.
You will need to install Windows on your internal disk first, then clone it your USB drive and remove the internal installation. The other option is to install Windows on the internal drive (C:) and use an external disk (D:) for all your applications and personal documents, which allows to port the disk to another machine.
In all these, you need to address your licensing needs, as appropriate.