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Ok. Long story: nLite was developed by a prodigy nick-named nuhi. He was later hired by Microsoft. When xp was around, and later when vista came out, administrators had come very nasty tools (very hard to use - way too much knowledge involved) called WAIK. vlite for example needs WAIK (or a slimmer version Kels uploaded here I think, I don't have the link anymore - I gave up vista ~a year ago after making me go nuts ). Later came RT7Lite that also involves the WAIK way of configuring your install. nlite besides beeing easy to use, and making ''kids'' everywhere become ''doctors'' in windows installation, had some breakthrough features like beeing ~ idiot-proof when it comes to removing stuff from windows or the first real AIO tool of its kind. Later however, don't know if nuhi had anything to do with it or not, beeing a Microsoft employee then, when Windows 7 came out, it had DISM integrated in it, a tool maybe not so versatile as WAIK, but more elegant and easier to use. Most features from AIO of Win Toolkit are just calling DISM from your OS to do the stuff you tell it to. DISM also has a remove features option, really not so ''evolved'' as in the WAIK for 7 version, and not so obvious in size-shrinking as that. Lego promised that in the future will bring some advanced vlite-like features of removing stuff not available through DISM, but you'll have to wait for them. You have one however right now, that really makes a difference when it comes to size shrinking, and its related to the natural language in 7. So please be patient for other removing features. However, if you think that the current ones are buggy, enumerate them (so it makes the job of Lego easier, since you have a tendency of posting long stories like this one).

Hey, I use Universal USB Installer for every single "system-installation-to-USB" work. Sure, it's focused on Linux distributions but at the bottom of your choices there are Windows Vista/7/8 Installer options. And the drive path is always formatted into FAT32.Works for me. Give it a try and tell me what you think.