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Windows 7 install on external disk

This assumes you have two hard disks. One a live working version of Windows and the other the target of the new installation.

If you want to install from a USB HDD or Memory Stick onto another disk, it's much simpler, steps 1 to 3 should give you a bootable Vista installer.

Steps 5 and 6 are required if the target of the installation is the same disk you are installing from.

Format the target disk as NTFS.
Copy the boot and sources directory and the bootmgr file from the Vista DVD or Image to the root of the newly formatted disk.
Start a command prompt and issue the following commands - where x is the drive letter of the newly formmated disk.
x:
cd /boot
bootsect x:
Boot from the disk - Windows setup should load
Choose the Repair option - skip through the prompts until you can start a command prompt.
Issue the following commands
c:
cd /boot
del bcd
bcdedit /createstore
cd ../sources
setup
Continue as you would with a normal installation.
Running setup again in step 6 is important. If you dont do this and continue with the current setup process you will get an error about missing CD/DVD drivers.