Your flashing seems to have gone fine from the screenshot. That second "Starting Outernet Flash" you can ignore (its just goes into that in case you want to flash another one - it won't hurt a CHIP already flashed in the first round, like yours was).
once the "please be patient" message showed up, did you wait for 5 minutes or so, as suggested? Did the LED on CHIP start blinking? If it did, the flashing completed successfully.
Don't worry about "usb device not recognized". Thats all right. Windows doesn't know what to do with CHIP.
oh, and no - the ISO won't boot - it was made exclusively to be booted inside VirtualBox, not real hardware.
After the LED has started blinking, you should still be able to access the chip by starting a browser and visiting http://10.10.10.10
do not unplug the CHIP before the LED starts blinking!