How to prepare:
1. Modify Windows XP installation files and create your installation CD with support for installation on USB. ()
Remove your HDD from bios, set up booting from CD
Install from CD to USB stick. In this step I had problem inside VmWare, After I selected to install to Usb drive, Installer give up with message like:
Cannot find harddrive …
Here comes in some hardware dependency. I finally succeeded with installing on usb stick on real hardware (In my case HP 8510w) where textual part of installation proceeded successfully.
3. Set up booting from USB stick and boot up from USB stick to continue installation in GUI mode. I went into a different problem in this part, textual message:
Cannot Find \Windows\System32\hal.dll
Solution was to edit boot.ini on usb stick to boot up from usb:
multi(0)disk(0)rdisk(0)partition(1)\WINDOWS="Microsoft Windows XP
You have to ensure that you are booting from first multi, first disk, first rdisk and partition number 1.
After this GUI installation processeded successfully.
Everything runs good, but my Flash Voyager 64GB is too slow I think. All disk operations slows system poorly. Probably some issue with USB drivers .. I have to check speed of that stick in real system.