Install Win XP on USB Hard Drive

Hello guys,I have got hold of an HP Thin Client which has just 512 MB flash drive inside and Win XP embedded version installed on it. I want to install Win XP Pro on it. Since the memory is not enough, I would like to install it on external hard drive. One thing I know for sure is that this thing can boot from USB. It doesn't have a CD ROM either. I have run Ubuntu 11.04 on it from pen drive drive successfully. So, I need some idea how it can be done....