You may consider to use WET (windows easy transfer) and PickMeApp: two free solutions to migrate from XP to Windows 7. WET may transfer your XP program settings to Win 7 while portable PickMeApp tool may transfer programs from XP to Windows 7. PickMeApp claims to support unlimited number of programs.

I am working on it at the moment from my house (I took my work computer home - I am a web designer).

I can't imagine life without it! So comfortable. I think its even better then a laptop.

I use Microsofts virtual Pc to help prevent rogue infections from the net and it is a very effective method...the only gripe I have with it is the virtualized machine only sees a low powered gpu which isn't much good for higher def video on the web....if this allows for full use of the host cpu and graphics hardware it would be great...does it?

This sounds to me like it might be a great backup tool, is it?

If computer Alpha was to breakdown then I'm guessing that so long as this device was mirroring the computer then this stick could be plugged into any other computer matching the minimum specs and the Alpha computer is backup, sort of. Is that correct?

Can they make it run on an eSata drive? Then I can see it's speed and availability making it an easy tool to use.

Sounds like an interesting application that actually looks like someone figured-out a good way to virtualize a template for a USB. The biggest problem is OS bloat. I wonder if they've provided a way to freeze the OS so you can boot from your USB without making changes. If you need to add a change there should be a mechanism to do so manually or appy updates, software, whatever.
In Windows 7 I've been using Virtual XP and the VHD file has hit 3 GB. I barely installed any software and I've cleaned-up the garbage but no difference. I haven't tried VHD Resizer yet. Browsing through I suspect I need to delete and recreate.
Regardless, then there's the 20 GB of files W7 requires for a fully installed, patched and critically important apps we use daily. I wonder if Zpod implements even a light compression because the space savings and probably loadtimes would be significant considering how fast CPU's are today. Especially since USB speeds are at least 6 times slower than HD loads.

Good article