I have used Boot Camp to create a bootable usb of Windows 7. But when I hold
Option to select the drive all I get is my Mac OS and the restore drive or whatever it is.
Shouldn't Boot Camp create the USB to be bootable? Am I doing something wrong?
For a drive to be Bootable by Intel Macs, it must be formatted with the GUID Partition scheme.
I ended up playing with the Superdrive a bit more, and eventually got it to read the DVD by laying the iMac down horizontally. I guess this meant the disk could spin easier and it read it easily.
Still doesn't solve my USB booting thing but...
There is an alternative method to a) create a bootable USB of Windows 7 and b) boot from it. Assuming that you have the ISO handy (if you don't, there's Digital River links here), download Unetbootin.
Unetbootin allows you to create bootable USB drives from many Linux distributions and also ISO images. (note that Unetbootin requires admin privileges) The following image demonstrates how to manually select the ISO image. Click the "..." button to browse for your image.
To boot from your USB drive, I recommend rEFIt. I use it myself to boot from an Ubuntu partition on my external hard drive that I use as a Time Machine on another partition. It is useful for recognizing operating systems installed on your computer and devices connected to your computer (and their partitions). I recommend simply burning rEFIt to a CD/DVD to boot to the Windows 7 install USB. Having had trouble trying to install it to the Mac itself (without the DVD), I usually boot to the rEFIt DVD, and continue to boot to my choice of operating system.
(boot to a rEFIt DVD by holding down the C key [or the option key, as you stated] after you hear the chime of the startup)
I know for a fact that Unetbootin works for creating bootable Windows install USB's (I've run them before on PC's). I will test booting from rEFIt and update this answer when I have.