I know this is the wrong forum, but... its so terribly useful!
I have been playing around with pen drive OSes, and its amazing to see how far they have come. These days having a full OS on your pen drive is
easy My current favourite is slax.
Features of this OS -
1. SMALL - Currently its occupying only 200mb on my pen drive!

, and it already includes an office suite
2. Installing applications is as simple as downloading a file (modules) .
3. All my hardware worked out of the box, display, wireless mouse, sound everything
4. EASY - You need zero linux experience to install and use this.
Step by step instructions -
Install slax from windows
5. Persistent - all settings are saved automatically . So any chagnes you make to the system are rememberd
http://www.slax.org/