I recently installed XBMC Live (linux) on a USB stick and am able to access my laptop's HDD for content even though I boot directly in to XBMC. Is there any way to enable wifi while booting in to XBMC live from the USB i.e. without installing it on HDD?
Probably not, since depending on your laptop you'll more than likely need to install drivers, and even then you'll probably need to do a lot of jerry rigging in a terminal window in order to properly configure it.
Why not just run the Windows version of XBMC (at least i'm led to believe such a version exists...I've only ever used it on Xboxes and via Ubuntu)?
Actually this is easy - follow the instructions on this site:
It took me around six minutes to set up and you don't need a full blown OS. It works within XBMC Live.
It does work as I'm doing it. You'll need to be using either an internal Wi-Fi device or a USB connected Wi-Fi adapter. I've not yet been able to get it to work with a PCMCIA card (and haven't tried it with ExpressCard).
The instructions referenced by Gareth are correct except you need to perform one additional step prior to following them; you have to make XBMC writeable on the flash drive. Otherwise when you reboot your changes will be lost.
To make XMBC writeable you need to perform the following 3 steps from the console:
Note that on my system the flash drive is device
These steps creates a filesystem called live-rw that's 600 meg. You can change this number as necessary.
Once this is done, reboot XMBC and changes you make will persist across boots. Now follow the steps as show in the xmbc.org forums.