Most new motherboards will allow booting to USB. I don't think the USB drive can be used to hold the operating system, mainly because Windows, especially XP, is too large for most flash drives, and also because they aren't designed for constant read/write cycles. What I think can be done is to put the boot files on the flash drive, and use those to point to the hard drive. There is quite a lot of discussion on this matter on various forums but I haven't yet seen a complete "how to do it".
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