Firstly, you'll need to restore Windows boot loader using Windows 7 DVD.
Boot from the Windows 7 DVD, and go to System Recovery, and from the available options, select Command Prompt and enter following Commands.
This should restore Windows Boot loader, and after restart, you'll not be presented with GRUB menu or any Partition related errors. Once you boot into Windows, you know the later steps to install Ubuntu.
And as far as booting from USB stick is concerned, you'll need to make settings in BIOS such that USB Stick is set as first device boot from. While most modern computers allow to boot from USB Sticks, this may not be the case with a fairly old machine (but your machine doesn't seem to be older since its already running Windows 7 :-) )