Installing XP to a USB-Bootable Device

The purposes of a USB boot device are many.

Except for being your primary operating system.

Booting from a USB device is helpful for:

Recovery from a virus or system malfunction.

Installing Windows from a USB CD drive.

You will not be pleased with the reduced performance of running Windows XP from a USB drive.
Even with USB 2.0, data transfer from a USB drive is many times slower than an internal hard drive.

Anyhow, assuming the Windows installer will allow you to install to an external drive (I have my doubts), here is what you would need to do:

Boot from the XP CD, or with the XP boot floppy set.

Start the installer.

When the message for installing storage device drivers appears press the designated key (F2?)

Wait for the installer to prompt you for the storage device driver.
Insert the floppy for the external hard drive driver.
Or, perhaps you need a driver for the USB port that Windows would recognize as a storage device.

Install Windows to the drive.

Keep in mind that Windows XP is tied to the hardware that it is installed on.
You will not be able to move the external drive among multiple PCs and run Windows.

Chas