It looks like Microsoft are getting closer to putting Windows onto a portable USB Flash drive.
The All About Microsoft blog has news an an upcoming Microsoft Start Key. It is the same kind of thing as U3 but more windows-centric. The idea being that you could plug it in to a computer at home/school/work or even a public kiosk and have all of your settings, wallpaper, windows Live Contacts, favorites etc. with you.
Microsoft"s goal is to build an end-to-end StartKey environment — comprised of everything from system software on the flash devices, a software development kit to enable third-party developers to create products that can leverage StartKey, and accompany Microsoft applications and services, sources said.