Booting from External USB CD/DVD Drive Fails?

[Me@Work]

Hello ThinkPad'ers!

I'm trying to get Win7 loaded up on my ThinkPad X30 but having some issues installing. Since the X30 doesn't have a CD/DVD drive you have to use an external one (or the official base). Now I have installed various versions of Windows through USB CD/DVD drives (NT4/XP/Vista) but it does seem like I've had this issue while installing in the past.

Basically I've set BIOS to allow USB device boot, but on F12 my CD/DVD drive isn't listed. If I use the "diagnostic" boot it does indeed show that my "USB: DEVICE" is in fact detected. If I use F12 and boot from "CD-ROM" (I think this is for the official base CD drive?) it doesn't work, and says "OS not found". The drive and disc work fine with my desktop computer, and once Windows loads on the X30, the it can read the Win7 CD just great, but the BIOS won't!

Appreciate any help, I would love to revive this poor computer.