Ghacks.net has a two part series on building a USB Rescue ‘disk’ for windows XP. Part 1 is here.

Two caveats:

You do need a software called Bart PE which will be used to create the bootable USB Rescue Stick, two files from the Microsoft Windows 2003 Server Service Pack 1 download and the Windows XP Service Pack 2 CD.

and

Please note that this is only working if you have Windows XP with Service Pack 2 on the disk. If you have an old CD you need to download the Service Pack 2 from Microsoft so that it can be integrated.

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