antistyleus :
USAFRet :
Short answer: No
Long answer: Yes, kind of. But it is a real pain, and will be dirt slow if you ever do get it working.
Add to that if you are trying to move that external install between multiple machines.....you run into it not booting at all, and licensing issues.
Thanks for the quick reply. Just to be clear i'm not trying to run windows from the external. I just want to be able to install from it. Not sure if thats what you were getting at in your answer.
Oh.
Yes, you can do that easily.
Windows 7 USB/DVD Download Tool will get the install on a USB stick.
Note - for what you are wanting to do this will only work with Win 7 and earlier. Windows 7 gives you 30 days before it must be activated.
Windows 8 requires the license key during the install.