I know the thread is a bit old, but I was having the same problem and found this thread through Google. After finding a solution I thought I would post in case it's helpful for someone else.
This error comes from the version of 7-zip that you're using. If you right-click on PortablePython_2.7.2.1.exe and open using the latest version of 7-zip, there is no $_OUTDIR (which refers to a folder name WITHIN the exe), but with some older versions it is present in the archive.
In particular I tried using version 9.20 (http://sourceforge.net/projects/sevenzip/files/7-Zip/9.20/) and with this version 7-zip finds $_OUTDIR and the script proceeds. I don't know if 9.20 is the "ideal" 7-zip version, but it at least gets past the $_OUTDIR problem.
Now for me it is failing elsewhere, but that is a topic for another day.