There is a fairly easy way to install Windows 7 from an external hard drive, and it takes less then 10 minutes to set up. You also don't need to switch to FAT32 to use this method.
First, format your disk as NTFS (quick format is fine, default sector size). Then, extract your Windows 7 disc/ISO to the hard drive. There is a utility included on the Windows 7 disc which allows you to mark the drive as bootable, located in the boot folder.
Once you're there, run BOOTSECT /NT60 X:, where X: is the letter of the external hard drive. Once that's done, you can just plug the drive into your computer, and you should be able to boot from it. Just FYI, the BOOTSECT tool updates the MBR for that drive's partition.
Alternatively, you could also just run the following command (from a command prompt or from the Run dialog, WinKey + R):
X:\boot\BOOTSECT /NT60 X:
Where, again, X: is the drive letter of your external hard drive. Once this is done, the hard drive has been marked as bootable, and if you try to boot your computer from it, the Windows 7 installation will be launched.
The reason they use FAT32 in that Technet article you posted is because those instructions were for a USB key. You can follow the DISKPART part of that guide to get your partitions prepared and setup, but do ensure that you format the drive using NTFS.
This need be done in a cmd of administrator otherwise it fails with the following error: "Could not map drive partitions to the associated volume device objects" – kroiz – 2013-01-04T21:16:27.433
You must also mark the external hard drive as active in order to boot from it. Otherwise the file 'Boot/BCD' will be unreadable and you'll get an error '0xc0000225.'
– Griffin – 2013-10-30T04:42:12.077I get the error
This tool can only be run on systems booted using a PC/AT BIOS. This system was booted using EFI or some other firmware type.when running the commandBOOTSECT /NT60 X:– ThreaT – 2014-06-01T18:09:07.493@ThreaT interesting, I assume then you have a UEFI computer and are using UEFI? EFI-based disks don't have an MBR, which is exactly what BOOTSECT adds - this question explains it in detail. To actually set the MBR in your case, you might want to use a different OS (like a USB key with Linux on it, and then create the startup disk from Linux), or possibly use a VM. Thanks for the heads up, let me know if and how you end up getting around the issue.
– Breakthrough – 2014-06-02T01:12:20.333