From what I have researched recently, is IS NOT possible to make a XP system boot from a USB stick. I've tried BartPE etc. which works but I want to boot my own XP not some limited version for repairs.
I think there is a possibility to do so in following way:
1. Install a virtual computer on your system
2. On this virtual machine, possibly running on RAM disk, install XP and whatever product you need, like drivers and software, just beware of the size.
3. create an image of the RAM disk - image of the virtual partition
4. boot this image from usb stick similarly as BartPE does, xp then runs from ram
This is a theory however, it should avoid the 0x7b well known problem when rebooting the install from the usb.