It has been brought to my attention there are flashdisks which have the ability to run programs etc like a virtual drive after you plug it in.

I don't really know how to explain it so ill just spill the beans on what I want to do.

Say I plug my flashdisk into a machine (most likely XP), I launch an application which acts like a virtual OS so I can run programs pre-installed (VLC, up to date bug scanners, guitar tablature programs etc). I'm not looking to boot from the thing because I want to do it while the machine is running, and presumably Xfer files...

There are quite a few applications that offer "PORTABLE" versions. VLC is definitely one of them, and I'm sure others you mentioned are as well. Have a google for whatever app you want to use & the word PORTABLE. Opera is another one, which you can use on any PC and not leave traces of your history, etc.

This way you don't need to have a Virtual OS, and it doesn't leave any traces on the host computer.

I'd prefer the virtual OS / integration method...they were merely examples...