Is it possible to install the operating system in a portable hard drive  

yes it is possible, there are some steps into it though. use it as primary master, boot cd first then install.

what errors? is the cd clean?

Not with Windows. But I know that you can boot from a LiveCD of Linux (Ubuntu or Kubuntu). After Linux has loaded, you can actually access your harddisks even if they are Windows partition.

Anyway, if you're not familiar or comfortable with Linux, you're out of luck.

Hi anurag, it is possible but you need to follow some tricky way, say a hack. There are several ways which you can follow, you may search the web with your favorite search engine "Install Windows XP on removable disk". You need to follow illegal way to get Windows installed to a removable media because Microsoft protects its Windows operating systems from being installed on removable drives due to licensing issues. If you like to use your computer till your primary HDD is ready, you may try some free Linux desktops like Ubuntu for temporary use because Ubuntu can easily boot from removable disks. Other way is use a Windows XP Live CD, grab one if any of your friends have it. Installing Windows on a removable disk will not guarantee speed as like a SATA/PATA hard disk. In certain situations, things would be worse because the USB2.0 interface is much slower than old IDE channels. Never do dream about running Windows or any OS on USB1.0 interface.

I believe that your portable hard disk is an USB disk ? It is possible only if there is an option to boot on USB on your motherboard -- check your BIOS --.
You can't boot XP from an USB hdd : http://www.microsoft.com/...
"Current versions of Windows should not be installed to USB hard disk drives because Windows does not support USB hard disk drives as the primary boot device."
Win98 and 2k are the last versions of Windows that you can boot on an USB disk.
However an USB hard disk is always very slow and the boot will take two or three more time than a normal disk.
In your particular case, I think I will use a small linux distribution -- DPup or Puppy -- booting on a flash card, and will use the portable hdd only as a storage device. This will work really fast.

Installing Windows on a portable drive can be a very problematic and tricky task, and is hardly worthwhile for a temporary solution. You would be far better using Linux as a few other respondants have suggested, which is much easier and also far more reliable.
I have Ubuntu booting from a flash drive, so an external drive will not present any issues at all. You may prefer Windows, but at least by using Ubuntu or a similar distribution you can operate the computer while waiting for a replacement.
Furthermore, unless you are concerned about the data stored on your original hard drive then it would be simpler to replace it with a new drive.

thanks to the new file systems is possible, also the new bioses are accepting booting from the usb devices. In fact there are already iso images ready to be recorded as portable usb OS specially on linux. but also some unattended versions of windows that includes already installed software like office and so on.

our hard drive was filled up, so we just bought an new hard drive for our computer. i think that what you should do as well. then make your old hard drive as the slave.
dont think you can put os our portable hard drive.

You've come up with another of those questions that I had to turn to my computer guru husband to answer. He says that it really isn't possible to install an operating system on a harddrive that is external to the motherboard of the computer. It is just like some of the programs that we will install on our computers that require system files to operate and thus won't work on an external hard drive.

Absolutely it is possible, you'll need to google it. It's even possible to install something like a slim downed Windows XP system onto a DVD. I have that as an emergency.

well. surely it is possible. i have read it on internet.. but still i never tried it. you can search for it in internet.. i am sure you will get good advices.