Well, I just had the same problem today. Windows 7 will not boot if you simply burn all the files to the dvd. You have to burn the .iso file using 'imgburn' or similar.
"There are alternative ways to installing Windows 7 without using a DVD-ROM drive.
You can copy all the Windows 7 installation files to another hard drive (if you have one) and install from there. If you only have one drive you can partition it and the run the installation from the newly created partition If you have a flash drive large enough you can create a bootable flash drive to install Windows 7. WinToFlash will perform all the steps you need to make your flash bootable."
"i know the OP has anwsered but i just wanted to say that i upgraded my vista to win 7 from just mounting the image to a virtual drive and it worked JUST FINE. i also did a Full install ... without upgrading.... from XP by mounting the image and installing it from there... the windows 7 cd copyed everything it needed to install
