You don't need anything bigger than 8GB, just make sure it's a decent flash drive and not a cheap-o.
Use Rufus
http://rufus.akeo.ie/ to make a bootable USB, and a good ISO of Windows 7. That's it!
That's for installing Windows 7
from a flash drive.
If so, any quik details you can chime in with?
Installing Windows 7 on a flash drive (or even an external HDD) is not straightforward for a rather simple reason: Microsoft doesn't want you to.
Can Windows 7 boot from an external USB or FireWire drive? gives a little bit of information on the topic.
Also, what size USB? 8gig or so?
The minimum disk space for 32-bit Windows 7 is 16 GiB. It's 20 GiB for 64-bit.