I'm a complete nub at this, so excuse my ignorance. I just set up a Windows 7 guest on my OS X 10.6 host through VirtualBox. Took me forever to figure out how to get my flash drive to show up on there ...

The "Bootable" legacy ISO you've used is in fact not bootable, it relies on CDROM emulation provided by BIOS. VMs don't usually do this sort of emulation. If you set the guest OS to something like ...