It is pretty common to put Linux on a USB stick. I used DSL (Damn Small Linux). It installed quite easily. The only twist was I wanted to have the distribution on the USB stick and run windows at the same time. So I just made the DSL install to the USB stick a virtual machine. It worked just fine. I did find an open source emulator (Qemu for Windows) that you could put on the stick as well, but the download site was not working correctly so I had to use VMware.
VA is for DSL :)