It looks like they may have revised it with respect to what you described. I was able to boot into a USB flash drive and still see the hard drive. In fact, I went into the BIOS config and was able to see the USB device as a bootable drive in the boot order menu and pop it to the top of the list so it would boot first.

gOS that it comes with (essentialy a tweaked Ubuntu) was visually appealing but seemed to crash a lot and did not manage WiFi very well.

So since Sylvania (Digital Gadgets) provides the XP drivers for everything, I built a USB flash-based Windows XP installer and blew XP onto it. When I left today, I left it downloading SP3 from Windows Updates over WiFi and it was just starting the install. Seemed to be fine.

One annoyance though, is that I guess it has a tiny fan underneath that makes a very annoying buzz when it spins to high RPMs. It actually sounds a lot like a CD or DVD drive spinning up and down as it's seeking.

It's certainly not a speed demon, but other than that its not a bad little laptop for $300 that fits almost anywhere.