Booting from External HD with XP on it

"This is a very good article about preparing custom WinXP images that can install to and run from USB hard drives. Anyway, this process is not trivial because it requires re-working of official CD image and adding USB hard drive... eh, drivers, but you should experience no problems following these recommendations, they are very verbose.

The only problem you can meet is need of disconnecting all internal hard drives (check last paragraph of article), but on a relatively new laptop untweaked WinXP install won't (not sure about SP3, SP2 won't) detect them anyway because it doesn't support SATA controllers in AHCI mode, i.e. native SATA."