I have a laptop with windows on it which wont boot... the cd-drive is dead too.
I decided to run damn small linux off of my usb, but i need some help setting this up.

your bios needs to be able to boot from a usb device

ok, i checked and the computer can boot from usb in bios. what is the next step?

insert the cd and boot the system, hit the BIOS setup key and make CDROM
the #1 entry

that doesn't work, because the laptop's cd drive is dead.

Umm, I think you place the setup files onto the USB drive, then set the BIOS to boot from USB, then put the USB in and start it. The installation file needs to be .iso though I think, and it should be just one file (you may need to download some extra software) , and the computer should be able to find it (not sure though).

I think we need to clarify what you mean by "USB". A USB CD/DVD device will work like any other. Just burn the relevant CD and boot away.

You need to do a special install to make your Linux run off USB mass storage like an external hard drive or a USB stick.

I know it's a bat far-fetched, but the official hints on the DSL homepage about USB devices just might help.. http://www.damnsmalllinux.org/wiki/index.php/USB_Booting#Localization_and_installation