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I have a laptop with Windows 7 Home Prem 32 bit.

I was wondering if i can install Win XP on to an External HD (USB) and boot from that? Is this possible and easy to do?

I've seen plenty of posts about dual booting with one HD and 2 OS but what about with an external HD with XP on it?

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This is a very good article about preparing custom WinXP images that can install to and run from USB hard drives. Anyway, this process is not trivial because it requires re-working of official CD image and adding USB hard drive... eh, drivers, but you should experience no problems following these recommendations, they are very verbose.

The only problem you can meet is need of disconnecting all internal hard drives (check last paragraph of article), but on a relatively new laptop untweaked WinXP install won't (not sure about SP3, SP2 won't) detect them anyway because it doesn't support SATA controllers in AHCI mode, i.e. native SATA.

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Yes, it is possible. Note, however, that your BIOS must support booting from USB devices and that the boot order should have USB precede HDD devices.

Alternatively, you could press the associated keyboard shortcut to reveal the boot device selection during POST (typically F12).

You will need a (separate) partition on your external HDD that is NTFS formatted.

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On Toshiba laptops (any with AMI bios, really) a menu is shown with ESC key that can be used to select a boot device temporarily. –  whitequark Jan 21 '10 at 12:58

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