Creating a bootable Win XP on SD memory card

There is no easy way to do this, and it isn't supported by XP. I had a Link that showed how it was done, but I never tried it and so I can't say whether the instructions in that link really worked, and now it seems that the link has gone offline... All other instructions are BartPE or UBCD4Windows based, and that in my point of view isn't what you are looking for.

In my opinion you should either install a Linux distribution, which is easy to do and straight forward, and will most probably work best on old or new EeePC's, or you can try installing Windows 7 or 8 to your SD card (provided the card is large enough and the PC's hardware supports the OS). Windows XP just isn't suitable.

The problem isnt just to boot from sd, you must slipstream the controller drivers to the install media

You could use WinPE (XP) and install that on a USB stick - see http://www.symantec.com/connect/articles/installing-winpe-usb-device-part-i-setting-everything

whats wrong with the standard drivers and just run update after?
Anyway any idea how to do this?

Standard drivers use either IDE or SATA, or maybe SCSI interfaces, while SD cards go via USB ports, and USB is absolutely NOT supported in Windows XP (removable disks aren't supported to install windows XP on). There is no way to directly install XP on a USB disk (or SD Card which technically is the same thing).

Although this also isn't supported in Windows 7, you can get it running if you follow the Link below (it also works for Windows 8, that's what I tried it with). There are some restrictions, though. The Windows updates don't work (or they didn't when I tried it). Also, you need a fast SD card, anything slower than 10 and you'll just be wasting most of your time waiting.

Generally you do the installation to a VM first using VMware Player. Also, while you run the OS within VMware Player, and if you have installed the NIC (which in the instruction below is disabled), the updates work:

http://ftanada.wordpress.com/2009/02/15/install-windows-7-on-a-usb-stickflash-drive/

My understanding is that Win XP with SP3 does support USB and can therefore install via USB or SD.....

The only way to install Windows XP on SD card is using an IDE -SD adaptor, like this: http://dx.com/p/sd-card-to-ide-hard-drive-converter-secure-digital-10889
This adaptor let use SD card as a IDE native disk drive, because Win XP not permit USB drives installation.

Try using a memory card reader, It might work.

How would such a device allow me to connect to a netbook?  Not quite the solution I was looking for.

XP supports USB only for connected devices, not for booting the OS from.

I'm not technically booting the OS from a CD drive, just intalling....in any case I have installed from an external dvd drive before to a desktop, but many years ago.  Some google searching also confirms that people have created bootable usb installations.