Here are some of the directions...mainly how to put the edited files in the iso of the windows cd. I will get the rest of the directions on editing the files soon.
1) Does your computer support booting from USB?
Usually, if its an option in your BIOS boot sequence menu, the answer to this is yes. If its not there then the answer is probably no. However, proceed and see what happens ;-)
2) Sorting out the "Bootability" of your USB-Drive
Connect your USB drive to your computer, directly, without a Hub. Then, shut down your computer, disconnect any other hard disk drives from it, and insert your original Windows XP CD into the drive. Start the installation, and proceed to the section where you are allowed to pick a hard drive. If it goes beyond the partition selection, your drive is already fine for booting Windows XP. If not (seems to be the cases with many of the Freecom USB HDDs for example), you will get an error like "Windows is unable to find your drive, partition, data etc bla". This is usually not a big problem. All you need to do is "properly" format the drive with the NTFS file system. After this, the drives are recognized as valid installation devices by the Windows XP installer. There has been no success in using the FAT32 file system for such purposes.
3) Dumping the original Windows CD into an ISO File
Pretty easy one. Simply open WinISO or your program of choice, and select Actions -> Make ISO from CDROM, and save your CD image.
4) Inject the changed files into the ISO which can be gotten from here for now,
http://www.savefile.com/files/1883181
Open your Windows CD image (The iso file you created) with WinISO or your program of choice. Navigate to the I386 folder, and delete the following files from the ISO,
DOSNET.INF
TXTSETUP.SIF
USB.IN_
USBPORT.IN_
USBSTOR.IN_
saving the changes to the ISO afterwards.
Just to be sure all is updated in the ISO, close and repoen the ISO in WinISO or your program of choice. Now, again go to the I386 folder and select "Add Files". Now add your changed files, Make sure you are adding the files to the I386 directory in the iso.
USBBOOT.INF
DOSNET.INF
TXTSETUP.SIF
USB.IN_
USBPORT.IN_
USBSTOR.IN_
Save the ISO then open it again and check to make sure the new files are in the correct directory...if so.. You are done with this portion of the procedure.
5) Burn the ISO back to CD
For burning iso's I use Alex Feinman's iso recorder which you can get here
http://isorecorder.alexfeinman.com/v2.htm ...After you install ISO Recorder, no program group is created and there is no application to run. ISO Recorder is a Shell extension, which means it provides additional options in a file right-click menu. To create a CD with ISO Recorder right-click on a file with .iso extension and select "open with" then click "ISO Recorder" Once the burning has completed go to step 6
6) Place the new windows cd in your cd drive,
7) Shut down your computer. Disconnect ANY internal and external hard drives (Except the one you want to install windows on, so Windows cannot find them during installation and mess up their Master Boot Records.)
Also, now connect your USB Hard drive directly to the computer, without any Hubs in between.
Windows should install just fine, with the exceptions noted below.
Issues you will encounter during installation:
During driver installation, the USB drivers will prompt you, as they are "not certified" - This is normal. Our changes invalidated the checksum, and therefore the driver is no longer signed. Just press "yes" a couple of times.
Upon completion of the install, the system will complain once on the first bootup that the pagefile does not exist. You can ignore this for now, as Windows will work fine without it. People are looking at fixing this issue, but its not critical for now.
Once everything is up and running , shut down and reconnect all your drives.