This happens because makeusb is not a Windows command. Makeusb is a batch file that's included in the archive you have extracted and you need to "be" in that folder in order to run the batch file. In the same way that, in the Windows Explorer, you need to "be" in a folder in order to open/run something inside that folder.
Click the Windows Start Button and type
cmd in the search.
cmd.exe should appear at the top. Right click it, then click "Run as administrator".
An "elevated command prompt" window appears.
Assuming you've extracted Chameleon_BS to your desktop, navigate to that folder by typing:
cd /users/[your account name]/Desktop/chameleon_BS
Now type makeusb [flash drive driveletter]:
You should see this:
Format G: ...
Create boot sector ...
Read DBR: successful!
Patching FAT32 BPB: successful!
Write DBR: successful!
Write MBR: successful!
Done.
RePlug device before using it!
C:\Users\[you]\Desktop\Chameleon_BS
btw this really works, and on my hardware almost out of the box. I could boot my 10.6.3 retail DVD restored to HDD with it, only adding fakesmc.kext (latest version available at the OSX Project forums) to /Extra/Extensions. Thanks ceckin. btw you should add that the command prompt must be elevated. I could not get it to work from a normal command prompt.
It is not necessary to unpack the whole archive to the root of the USB drive, just the file 'boot' will do.
Extra/usr is not necessary and I don't think Chameleon will even look inside that folder.
See screenshot of a Chameleon folder hierarchy below - note that the files shown are from my personal configuration that works with my hardware. The screenshot is just to show what it might look like.
Important:
OS X property lists are UTF-8 formatted
XML files. On Windows, use a proper XML editor like Notepad++ to edit smbios.plist and org.chameleon.Boot.plist:
http://notepad-plus-plus.org/ (get the minimalist version)
Do not use regular Notepad or Wordpad. They will mess up the formatting big time and Chameleon will not be able to read your plists. I have attached a clean org.chameleon.Boot.plist and my own MacPro3,1 smbios.plist.
I copied my Chameleon HDD installation's Extra folder to the flash drive and as expected it boots right into 10.6.8 without a hitch.