Brah1 to put xp on ur pendrive do the following.
1. Download novicorp wintoflash
2. Put in ur pendrive
3.Insert ur windows xp install disk
4. Launch the application.
5. follow the instructions, select windows xp and select the path of pendrive and the cd drive in the appropriate boxes.
6.Start the process. (Note in this process ur pendrive will be formated)
7. After the transfer is over, Reboot laptop, Enter the bios by pressing f8 or delete.
8. Go to advanced cmos settings
9. In the first boot device, select it as usb hdd or anyother suitable option according to ur laptop( Pls consult ur laptop manual if u dont know abt it)
10. Save changes and it will boot from the pd.

Note: I hv noticed that xp install through a pendrive is slower than the cd method. But the same for win7 and vista is not true. They are faster through he pendrive method

pls report back