installing linux to an external drive

[Doug Sutherland]

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.