MagicISO Image to USB Flash

Hello all. I have read the "ISO image to USB flash" thread and tried to do the "xcopy" to copy my windows image to a USB flash. Unfortunately, i have failed coz it said not enough space. However it's a formatted 2GB flash drive, and should be enough since the ISO is only 707MB. But i've found that it's also impossible to burn it into a DVD using nero, still, the size is to blame. The only way to burn it into a DVD is by using MagicISO, which compressed the folder in extreme ratio to a 707MB size. Hence, it would be extremely big if i just extract the iso.
The size of ISO:

The size inside the ISO:

For a record, it's Wesmosis Windows XP SP2.5 The Final.
Ive also ried to use MagicISO instead but it's no use since MagicISO can only burn it into CD/DVD, not a USB Flash Drive. Any idea? Thanks in advanced.

Tried to do that, which mount by using Daemon Tools, but results in 114gb, just like the above screen showned. And when i try to copy the whole iso, it's still insufficient space. Any idea?