OK, maybe y'all knew about this but I just figured it out! Techie nonsense follows...
I've had Ubuntu 6.10 Linux running on a very old laptop with a flaky hard drive. The hard drive finally went to that Big Scrap Yard in the Sky. I tried getting Ubuntu to boot off of an external hard drive directly, but all my attempts were miserable failures.
So, quite by accident, I stumbled over "persistent" mode for the Ubuntu LiveCD. Taking an external USB hard drive, I partitioned off 50 Gig and formatted it to ext3 (you can also use ext2. No VFAT). I formatted the remainder as a FAT32 partition with an arbitrary name. I then used the utility "e2label" to name the ext3 drive "casper-rw".
Reboot from the LiveCD, choosing F6 to add the word "persistent" to the end of the boot line. Ubuntu now uses that casper-rw partition as a writable extension of the CD. Everything you do is saved, you can update apps that are on the CD, install new ones, etc. Best of all, with the CD and hard disk, you can run your Ubuntu system off of any computer that allows booting from the CD (almost all do). The FAT32 partition is used to store data files that I want to exchange with Windows.
Booting off the CD is VERY slow but, once it gets up and running, occasional delays as it unpacks a new app from the CD is all you will see. This also works with any USB key.
An excellent way to use Linux without doing anything to the mission-critical Windows machine.