Yesterday I mentioned I'd like to experiment with Longhorn by installing it onto an external USB drive. I'm not so sure now whether that will be possible. I came across a post by Raymond Chen Why can't I install Windows on my USB drive? :
A collection of limitations (both hardware and software) currently prevent Windows from booting and running off a USB drive. Some of them are described in this whitepaper from WinHEC 2003. Another reason not mentioned in this paper is that during any hot-plug operation, the USB bus is completely reinitialized. Windows really doesn't like it when it loses access to its boot device. Imagine, you plug in a USB camera, the USB bus reinitializes, Windows loses access to the boot drive, and *oops* the kernel needs to page in some data and it can't.
However there is a paper on the Windows Hardware and Driver Central site - Recommendations for Booting Windows from USB Storage Devices - which suggests that installing on a USB drive may be supported in Longhorn.