If your PC BIOS can boot from USB device, yes http://www.google.com/search?hl=en&q=linux+install+usb+drive&btnG=Google+Search&meta= On an older PC without support for USB booting, you could probably boot a small root file system from hard drive (possibly creating ramdisk) which after loading USB drivers could mount onto an external USB drive. The chroot command is interesting for things like this.
