You need to download two files for this process:
http://www.pctipp.ch/ds/28700/28790/HP_USB_Boot_Utility.exe
http://any-server.com/xp-install-from-pendrive/solution.rar
(Less Than 2MB)
Extract the dos files(solution.rar) to c:\dos.now run the HpUSB format utility to format the pendrive and make it bootable.Run the Hp USB utility.select the USB drive(usually it selects automatically).select the check box create a dos startup disk and check "using DOS system files located at and select the target location where you extracted the DOS files.your utility should look like this.
Click start.
Now copy the other files in your extracted DOS files folder to the pendrive.your USB should look like this.
Now copy the setup files from the Win XP setup CD or from your hard disk.Thats it .Your bootable Win XP USB setup is ready.
In the bios ,set boot priority for the USB as first and perform the boot.the cursor will stop with a drive.Type nc and hit enter. Norton Commander will open.This will copy all files from pendrive to disk C.
[Note: You can also install directly from the pen drive by typing "cd I386" and then running "winnt" instead entering the norton commander].
Remove Your pendrive and reboot your system.The system will enter the windows setup wizard.Then the usual routine as installing from a CD.You are done..!!!
or Just Boot from da Pen Drive and Go to XP Files Folder and 1386 folder > run winnt.exe
----->you can copy da folder i386 to your Hard Drive(which in XP CD ) and in dos Prompt type winnnt.exe .. this will open win Xp setup 
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