Well, I called Microsoft and the guy told me that you can do it. I told him I wanted to install Windows XP on an external drive, then he said that you can do it by picking the default drive you want to install the OS, then install it. After that, you can plug in your drive and pick your OS.
I am still trying to see what I am going to do about this. I am a little scared. If I do try this, I am going to backup all of my files first.