Problems With the Concept

• Microsoft, as the company that makes Windows XP, is probably not keen on the idea of copying its software onto external drives and then onto different computers. First, it loses revenue because its licensing structure is that you pay on the basis of the number of machines you use the software on. If you put the software on an external drive, you could use it on a number of machines without paying a license for each one. Second, the risk of copying and counterfeiting go up because external drives can be basically duplicated as a proxy for buying Microsoft's product. Since external drives go for less than what the software full license sells at, there's a temptation to cheat the system. As a result, Microsoft doesn't make it easy to install XP on anything other than a full computer.
  
  

Workaround Method

• That said, someone always finds a way to get through a wall, even if it means going over or under said wall.
  
  First off, the motherboard of the processor that will be used has to be tweaked. Its BIOS needs an option to boot from a USB hookup. This means overriding the normal default instruction to look for an installed hard drive. This can be forced by unplugging an internal hard drive completely so the system can't find it when booting.
  
  

Installation

• After you know the BIOS will work as needed, you need to hook up the USB drive and put in the installation disk. Turn on the computer processor and monitor and look for the setup execution to occur. The setup process will look for and identify the USB drive as the hard drive to target.
  
  First, you need to make sure the USB drive is big enough to take the operating software. If it's too small, the program will cancel out. Using a 20GB or larger external drive will give plenty of cushion room. Second, you will need to use setup to format the external drive to the appropriate language for installation, usually NTFS.
  
  

Direct the BIOS to Comply

• When the external drive is ready, go back into the processor at the start and instruct the BIOS to look for the USB drive first in boot priority. This will force it to use the USB external drive first before ever looking for an internal drive. Then, whenever you are hooked up, the external drive will dominate the operating system by default.
  
  

Option: Try Different Partitions

• Rather than swapping out between drives, an alternative is to use the external drive, after it is loaded with Windows, as a different partition. The drive has to be connected to the computer for this to work, but the BIOS can be configured to see both the hard drive and external drive as different partitions.
  
  

Option: Windows Virtual Drive

• If you're willing to spend some money on have a mobile PC, but you don't want the hassle of a netbook or laptop, Windows Virtual PC is something that could be explored. The tool allows you to establish and operate different virtual machines on the same physical computer.