I believe Windows 7 disks need to be DVD.
I will let others offer their own suggestions as I may be wrong, but as Windows 7 arrives on a DVD it seems to me it needs the extra capacity for recovery disks.
We just acquired a new laptop with Win7 HP preloaded. One of the first things I did was try to make a System Repair CD (Start/All Programs/Maintenance/Create a System Repair Disc). The CD burning process seemed to go normally. When I tried to run the disc, it seemed to load normally until it got to a screen with the "streaks in the sky" wallpaper and then it stopped. There were no menus, messages, or anything except the wallpaper. I made two discs using a name brand with the same result. I know disc quality used to be an issue but I didn't think this was so these days among the name brands. Has anyone else had this happen and/or does anyone know a solution?