Unless you downloaded the iso from an official Microsoft site, the ISO to USB program might not work for you.
I used WinToFlash, which works with many windows versions for transferring the install files to a bootable USB stick.
http://wintoflash.com/home/en/
As for the BIOS: Install it first before installing Win7.
But if there's nothing wrong you don't have to update it. (If it ain't broke, don't fix it.)