How do you make a WinXP bootable USB drive?

Use BartPE to make a minimal environment you can boot from USB media, and from there you can prepare your windows installation and run the appropriate installer.

http://www.nu2.nu/pebuilder/

Once you have configured your BartPE image, and sent it to your USB drive. Go ahead and reboot and issue the following command:

D:\i386\winnt32.exe /syspart:C: /tempdrive:C: /makelocalsource

Where D: is your USB drive, and C: is the hard drive you want to install to. Just walk through the various prompts etc.

I've never tried that, but a google search pulled up this pre-done image for a bootable xp image for USB sticks: http://keznews.com/2407_Windows_XP_USB_Stick_Edition