You can boot from a USB "device". You can boot on a USB floppy or a USB
CD-ROM and install Windows to another non-USB hard disk when you boot
with another device, but at the present time you cannot install any
Windows desktop/server version to a USB hard disk without hacking the
installation files and hacking the way Windows boots and
loads/initializes the USB drivers. You may be able to install and boot
other operating systems to a USB drive but this is not supported out of
the box for Microsoft desktop/server operating systems, Microsoft does
not support this boot method.
As for the RAM stick question I think it would still be able to boot the
computer and that you could use the USB drive, you can boot a PE version
on a USB stick, the difference is that when you boot with the RAM stick
you don't need to retrieve and write files to the USB hard disk while
the computer is booting, once the OS on the stick is loaded if it has
USB drivers then it should be able to read write to the USB hard drive.
You should be able to find information about that on Bart's PE site
and user forums, or on the Ultimate Boot Disks for Windows site.
You can get a idea of what needs to be done to install and boot Windows
on a USB drive here:
http://www.ngine.de/index.jsp?pageid=4176
As Bob mentioned in his post, unless someone has very specific needs I
don't much see the use of this booting method, not to mention that USB
drives are about the slowest hard drives available, performance wise not
the best for the operating system.
John