Can Windows XP Setup recognize an external HDD from USB?

[gaouser]

If not. Is it possible to sideload a driver etc?

[j7n]

Do you want to install winXP onto an external drive? There is a set of instructions on how to boot WinXP from a USB disk. I have followed them personally to hide software at work. They were made when SP1 was current, and may still work with later SP, but I haven't tried.  They  involve changing the order at which USB drivers load. You need to install Windows on the disk while it is directly connected to the motherboard.

When the Archive Org come back, you can read it here:

http://www.ngine.de/index.jsp?pageid=4176

In the meantime, you can read my copy:

http://j7n.sytes.net/misc/xp_usb_msd/