Windows (all versions) must have it's boot files installed to the first physical HDD on a computer system, and those boot files must lie within the first 8,192MB (8GB) of that first physical disk in order for Windows to boot... for NT4 it's 2,048 MB (2GB). Therefore no, you can't boot Windows from an external HDD.
You could always use a disk imaging program such as Symantec's Norton Ghost, and clone your internal HDD containing the XP OS to an external HDD. The contents of that cloned USB EHD could then be cloned back to your internal HDD, should you wish to restore the latter. There's an indication that MS is encouraging MB manufacturers to provide this capability...
... although in that same article MS states "Windows as it exists today is not optimized to run as an installed operating system from USB attached mass-storage or CD".
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