Use Rufus to create a bootable USB install flash drive from the ISO image file.

http://support.citrix.com/article/ctx116673

To mount an external storage device in a XenServer Windows virtual machine use the following steps:

1. Connect the external storage device to XenServer.
2. Open the XenCenter Console from client computer.
3. Select the virtual machine to which you wish to add the external storage device.
4. Click on the Storage tab.
5. Click on Attach.
   1. The storage device may or may not be automatically assigned a drive letter.
      1. Click on Console tab.
      2. Open Disk Management
      3. Highlight the newly created unallocated partition
      4. Select change drive letter and path
      5. assign drive letter.

http://blogs.citrix.com/2010/10/18/how-to-add-a-usb-drive-to-citrix-xenserver-as-a-local-sr-storage-repository/

In a pinch, you can use /dev/sdx formatted device names.

xe sr-create type=lvm content-type=user device-config:device=/dev/disk/by-id/usb-<your-device> shared=false name-label="USB L1 Backup Storage"