YES it is possible to install and run XP on portable USB pendrive or portable HDD via USB, with or without internal HDD
to do that, it is complicated, long and not easy. I spent 2 night with no sleeping to do that
you find all information on the only real site that explained me how to do
http://www.ngine.de/index.jsp?pageid=4176
all other method are not serious or not what you want (like BARTPE)
in the website, go read, understand and do step by step
for installation, I always remove phisically my internal HDD to avoid any bad surprises with the MBR, NTLDR, ...
I did that on 2 pc, my dell for works and a old portable ACER at home
the USB HDD worked on both dell and acer
the und stick ONLY worked on Dell, donīt know why
I even install Linux + XP on my pendrive for fun
only comment (logical) your "XP on usb" can ONLY work on the PC you have installed it !, because XP needs drivers and stuff to run. If you boot the pendrive on other PC, you will have a gentle blue screen with ERROR 0X00000B or stuff like that. It is the same if you take HDD from DELL and boot it on ACER
so forget the idea to go in the intenet cafe of your vacation place to run "your XP" on someone else PC
I think only linux can do that maybe...
ouioui