No confusion here!
Yes what you are asking is possible ... and not impractical at all. However only newer mobos support booting from USB ... so it's worth checking yours before you start.
Having said that ... the method was originally developed to work from a CD which is just about the best solution for booting all machines these days.
Windows PE (as this type of config is known as) is an accepted tool use to run windows applications on a system that won't boot (see the links I provided earlier.
also Knoppix, damn small linux etc etc
It provides easy access to your system and allows
recovery access to your files and to most external storage devices you'd want to use as backup.
Vista is also catered for
http://technet.microsoft.com/en-us/windowsvist a/aa905120.aspx#EYD