While the easiest way to install Windows 7 on a netbook is by booting from an external DVD drive, it’s probably not worth spending $100 on a drive that you won’t use more than a few times. It’s much more economical to use a 4GB USB key, which will only set you back $10-15. And it will also be quicker and more convenient!

But installing Windows 7 via a USB key isn’t as straightforward as it seems. You can’t just copy the contents of your Windows 7 DVD onto the USB key and then boot from it. Before you even think about copying Windows 7 to the USB key, you must give it an active partition it and make it bootable. As many of you will be upgrading to Windows 7 from Windows XP, we will go through the steps required to prepare a USB key on a Windows XP-equipped computer.

Note: Because Windows 7 can’t be installed as an upgrade over Windows XP, you will need to use the ‘Custom’ installation option, which means all your programs and data will be lost. For this reason, be sure to back up all your data, programs, e-mail and configuration settings before you attempt the installation.

Step 1: Format the USB key and make it active

Because a USB key is seen as a removable device in Windows XP, the Disk Management console won’t let you partition it, nor make a partition active. That option will be greyed out.

It won’t even let you format a USB key using the NTFS file system.

To get around this limitation, you have to use a third-party utility.

We’ve trawled through countless guides on the Web, and found that the easiest way to format our USB key and give it an active partition is to use HP’s USB Disk Storage Format Tool. Not only can this format your USB key using the NTFS file system, it also automatically makes the formatted NTFS partition an active one.

You can download the HP USB Disk Storage Format Tool from HP’s Business Support Center.

To use it, simply select your USB key from the ‘Device’ list, change the ‘File system’ to NTFS, select Quick Format and click on Start. The whole process will take a few seconds.

HP’s USB Disk Storage Format Tool is simple to use and it will work with most USB keys.

To confirm that your USB key has been correctly formatted, right-click on My Computer, click on Manage, and then click on Disk Management. Your USB key should now be listed with a ‘Healthy (Active)’ status, and it should say NTFS next to the capacity.

Before we formatted the USB key with HP’s tool, the status simply read ‘Healthy’ and the file format was FAT32.

Step 2: Make it bootable

Now that the USB key has an active NTFS partition, the next step is to make it bootable. For this step, you will need your Windows 7 DVD and you will need to get your hands dirty in the Command Prompt.

Windows 7 uses a loading program called Bootmgr. The active partition on the USB key needs to have code written to its boot sector that is compatible with Bootmgr. This code can be written to the USB key by using the bootsect.exe program that is present in the Boot folder of the Windows 7 DVD. To extract this code, we have to use the Command Prompt. From the Start menu select Run, type cmd and press Enter.

Once the Command Prompt is open, switch to your Windows 7 DVD by typing the drive letter for your DVD drive, which is usually d:. Then, you must type the following line:

boot\bootsect /nt60 j:

In this line, we are telling bootsect to use the /nt60 command to write the compatible boot code to our USB drive, which is the j: drive. Substitute the letter of your own USB drive for j:.

When this is successful, your screen will look like this: