In my experience, Windows really doesn't like being on any external drives, even if they are recognized by the BIOS. Removable drives also don't show up in FDisk, which is why I've never gotten Win95 to boot from a ZIP disk, even with virtual mem disabled.
Whenever I try to install Windows on a non-IDE or SCSI drive, it crashes with a BSOD and tells me it is a non-accessable boot device. Windows does the same thing (in safe mode) if you swap motherboards, or if you're trying to boot off a 3rd party IDE controller (regardless of whether it's a hard drive or CD-Rom).
It might be possible, but I think you're in for a nightmare. Besides, putting Windows on an external drive might seem like a form of piracy or illegal copying to Windows, so the OS may not want to work at all. I'm just speculating, but it seems entirely possible given how many BSOD's I get when mucking around with my drives. Win98 certainly didn't give me as many problems. :-?
Oh, and if you do anything at all with Win2K, I'd recommend partitioning with FAT32. NTFS has security desciptors which might also prevent the system from booting from non-IDE or SCSI drives. Again, I'm just guessing. NTFS is an all-around pain in the butt!
