1. Some machines don't support USB as a boot device (depends on BIOS)
2. an ISO is a DISK (optical) image file. If you just pasted the .ISO onto a stick, it's like having a virtual DVD that the machine can't read on a flash device.
You need to unpack the ISO with something like MagicISO (free trial available) and copy the individual files that come up onto the stick, exactly how they are when the ISO is unpacked. Or, you could just pick up a new DVD drive for like £14 off the internet if you can't get it to work.
Installing Microsoft Windows XP from usb device (usb-stick, usb-hdd, SD card) simpler method [EeeUser Eee PC Wiki]
Use a USB Key to Install Windows 7