Note :-Your computer bios should be compatible with the usb boot function (most motherboards released on or after 2005 are compatible)
First of all download the following free tools:
HP usb stick format utility
Now follow the steps:-
STEP 1.Formatting the USB flash drive
Firstly, try to format the USB fl ash drive using the FAT 16 file system as most BIOS generally accept this particular format as a bootable medium. Surprisingly, the onboard Windows formatting tool did not work for us. So, we opted to use the “USB Disk Storage Format Tool” from HP instead. After starting up the program, choose the USB fl ash drive to be formatted and select “FAT” located under “File System”. Enter a name of less than 11 characters for “Volume Label” and click on “Start” to begin formatting. After the process is completed, open Windows Explorer and navigate to the root directory on which Windows is located - usually, “C:\”. Copy the “boot.ini”, “ntdlr” and “NTDETECT.COM” fi les from the directory to the USB fl ash drive. If you can’t locate the above mentioned fi les, try deactivating the “Hide protected operating system fi les” option found under “Tools Folder Options View” of Windows Explorer. Next, select “Show hidden files and folders” option as well. You should be able to see the fi les now. Copy them to the formatted USB flash drive.
Copying Windows to the USB flash drive
The next process is divided into four stages. Firstly, you need to free Windows of any excess baggage. Secondly, prepare third-party utilities, then create a self starting copy of Windows and finaly, copy all of these to the USB flash drive.......................
STEP 2. Standardizing Windows
To produce an optimal copy of Windows XP complete with service packs, hotfi xes and drivers, you can use a freeware called “NLite”. Note that NLite requires access to Microsoft . NET’s library, which needs to be installed on your system. This and Service Pack 2 are available on the Microsoft web site. The Service Pack and hotfi xes need not be installed as NLite will only integrate the necessary setup fi les. Remember to install the .NET-Framework before NLite. Before running NLite, create a folder named “XP” on your desktop. Insert your Windows setup CD into the DVD/CDROM drive and copy the whole CD into the new folder. Any changes made from now are done to the newly copied fi les in the XP folder. Do not meddle with the existing installed copy of Windows on your hard drive. Run NLite and select the “XP” folder as the root directory. Click on “Next” after the program completes reading the folder until you reach “Task Selection”. Activate options for integrating SP and hotfi xes as well as “Erase components”, “Patches” and “Tweaks”. With the help of the NLite wizard, you should aim to create an optimal streamlined copy of Windows. To minimize total fi le size and shed excess baggage, remove any entries highlighted by NLite as safe for deletion. Visit www. msfn. org (MSFN Forums - Member Contributed Projects - nLite) to get more information on the latest confi guration manuals and other useful tips on this program. Also, If you prefer to use an alternative browser such as Firefox, you may discard the Internet Explorer option but do include the “Internet Explorer Core” option so that useful features such as Windows Update can still function.
STEP 3. Preparing utility tools
The next step involves preparation of installation fi les for each utility tool to be included into the USB fl ash drive. If you want to include Firefox, do not use the full setup fi le from Mozilla’s web site. Instead, use the “Mozilla Firefox Plug-In” customized for “Bart’s PE” (available from http://oss.netfarm.it/winpe. Besides Firefox, you might want to include other software such as Ad-Aware, Nero Burning ROM and Avert Stinger anti-virus scanner. Any other software you deem necessary can be included but do take into account the space limitation of your fl ash drive. As NLite only creates a copy of Windows that contains setup fi les and not the installed version, we will not be able to copy the entire “XP” folder nto the USB drive. To create a bootable Windows XP, we need to make use of the “Bart’s PE” tool found at www.nu2.nu. after installing “Bart’s PE”, run “PE Builder” and insert “XP” as “Source”. When referring to this article, just use the default directory name provided (C:\PEBuilder319\BartPE, depending on your version of PE Builder) located under the “Output” section for convenience. Next, click on “PlugIns”. If you follow our recommendations, choose to activate the plug-ins for Nero, Ad-Aware and Avert Stinger. If any of your desired tools are not displayed, visit www.nu2.nu/pebuilder/#plugins to download the necessary plugins and extract the file into the plug-in folder of Bart’s PE. Every plugin contains a readme file that describes its installation.
STEP 4. Integrating safety tools
For each tool that was marked for inclusion, there would be a specifi c folder respectively found under Bart’s PE installation directory. All the necessary fi les should be copied here. This way, the selected tools will be installed with Windows. Let’s start with the Firefox browser. All we need to do is extract the downloaded plug-in into the “C:\PEBuilder319\plugin” folder. You don’t have to make any changes as the plug-in is already optimized for integration to Bart’s PE. Next, proceed to install Nero Burning ROM. Copy all the fi les from the Nero directory to the “nero burning rom” plug-in folder. In that folder, you will notice a fi le called “penero.inf”. Open it with a Windows text editor (e.g. Notepad). For Nero Burning ROM version 6, discard the semicolon (;) in front of [Software.AddReg] and for the three lines below. Edit in your username, company name and Nero serial number before saving, and closing the file.
Making Windows bootable
Up to this point, all preparations are ready. Ensure that the USB fl ash drive is plugged in and delete any fi le copied for the first test. Next, run PE Builder and make sure that “XP” is selected as “Source”. Deactivate the “Create ISOimage”and “Burn to CD/DVD” option. Click on “Build” so that Windows is created as a self-starter.
REMEMBER UR WINDOWS XP SHOULD BE A SERVICE PACK 2 ONE.
Copying files to USB Flash Drive
With the help of a batch file, you will now
be able to copy Windows to a USB fl ash drive. Point Windows Explorer to the folder “C:\PEBuilder319\plugin\peinst” and run the fi le called “peinst”. In the opened DOS screen, select button  and change the source-path to “C:\ PEBuilder319\bartpe”. Next select button  and enter the letter in which the USB fl ash drive is located as your target path. Moving on, choose button  to install Bart’s PE and start through button . Bart’s PE will now transfer all relevant data into your USB fl ash drive. When the “Installation completed” message shows, your USB version of Windows is ready for use. To test it, boot your PC with the USB flash drive. The USB version of Windows will look slightly different when compared
to the standard Windows XP.
Source : Orkut