Carey is correct in that you cannot *directly* install the XP OS onto a USB
external HD (although some users have reported this could be accomplished,
however, I've never come across a confirmed instance of this), however,
through the use of a disk imaging program one can "clone" the contents of a
HD containing the XP OS to a USBEHD presumably for backup purposes. The
USBEHD will not be bootable although again, some users have reported they've
been able to achieve this "bootability".
Anna