?
The Boot Camp assistant gives you the choice to make the USB installer on the second screen --- "Create a Windows 7 or later version install disk"
(First screen is the Introduction, then the second screen is Select Tasks, which is where you see that option)
But, if your Windows ISO is not on a USB stick, then you need the ISO burned to a DVD. So, the USB stick would save you from having to connect an external optical drive.
You DID create a partition, correct? That's where you can decide how large the partition is that you make with Boot Camp.
If you DID make a partition with Boot Camp assistant, then re-launching Boot Camp assistant will give you the opportunity to remove that partition, which is on the same Select Tasks screen.
You STILL likely need to format the partition that you created with the Boot Camp assistant, so be sure to note that page when it appears during the Windows install. The error message that you got is probably AFTER you select that partition and format it - correct?