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To start with, make sure your downloaded Windows 7 files (the 'expandedSetup' directory) is unzipped into C:\ — it'll make things easier later.
1. Download this tool — alternatively you can obtain the official pack from Microsoft, but that's a whole darn gigabyte.
2. Unzip and move oscdimg.exe to your System32 directory (likely to be C:\Windows\System32)
3. Open an elevated command prompt. In Vista you do this by typing 'cmd' into your 'Start Menu' and hitting ctrl+shift+enter. In XP, just type 'cmd' into the Run dialogue (Windows Key+R or from your Start Menu).
4. Type (or copy and paste) the following into your command prompt (this will vary a little, depending on where you've put your expandedSetup folder):
oscdimg.exe –u2 –b"C:\expandedSetup\boot\etfsboot.com" –h "C:\expandedSetup" C:\WIN7.ISO
5. Ta'da! You've got a burnable ISO!
All you need to finish the job is a good burning application like ImgBurn, CDBurnerXP, or InfraRecorder. For this particular task I'd recommend ImgBurn – then just right click the ISO file and start the burn from your context menu. Or launch ImgBurn and choose "write image file to disc" — your choice!