i reccon you could. Funny thing actually. I just finished formating mine. its been stuffed for weeks.

1st just check, are you sure the copy of xp is 'booable'? or do you maybe need to start windows first then run it? i've got two versons of xp. one is bootable the other needs to have winows running then you install it. that might be the problem
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once the caddy is connected to your comp, start up and boot from cd. you should be able to select which drive you want to install xp to. do a format 1st then install to the portible. make sure you dont install it to the wrong drive hey. then you'll be stuffed