Windows generally cannot be installed onto a USB drive due to the way it handles USB devices on startup.
However, Windows XP can be installed on a USB drive with some hacking. See here. It's a little involved. I assume the drive would appear as a standard Bootcamp drive (and boot properly) after this process, but I've never tried.
I'm not sure about Vista and 7. I think they have the same USB issues as XP, and there might be a similar "hacky" solution.