Creating a Bootable USB drive
You can use the ISO file of Windows Server 2008 R2 to create a bootable USB drive too. For this scenario you need to create a bootable DVD first or mount the ISO file. After you have gained access to the files on the DVD or in the ISO file, simply type the following commands on a system with the image mounted or physical DVD copy in the drive and the USB device plugged in:
diskpart.exe
DISKPART> list disk
Select the USB device from the list and substitute the disk number below when necessary
DISKPART> select disk 1
DISKPART> clean
DISKPART> create partition primary
DISKPART> select partition 1
DISKPART> active
DISKPART> format fs=fat32
DISKPART> assign
DISKPART> exit
xcopy X:\*.* /s/e/f Y:\
where X:\ is your mounted image or physical DVD and Y:\ is your USB device
Source: blogs.dirteam.com
I’m going to try this technique out later today on a small “appliance” server with a quad-core Xeon, 4 Gigs of RAM and no optical drive – this server is for running small appliances under Hyper-V in my home DMZ, and installing from a USB flash drive would be great.