my bios is "supposed" to recognize usb drives during the boot process (but I have never had any luck with it) I have an HP Pavilion dv2000t notebook. I even removed the internal SATA drive, and tried to boot with just the external USB drive connected, but bios tells me there is no operating system present. I also did adjust the boot device order and put all the usb devices first. I finally did give up, and cleared out a little space on my main drive for the linux install, and EasyBCD adjusted the boot manager just fine to find it there. But alas, I was hoping to use the external drive as I have more space there! Thanks.
Another option is to install Linux to the desktop, but point the /home folder to the external drive - that way all your documents, files, settings, downloads, etc. will be stored on the external drive.