I know that many users face this problem while installing xp on netbook. The moment you boot from external drive or usb, blue screen appears showing some missing files (bootmanager). This happens because of the new SATA hard disks of netbooks are in ICHE configuration that blocks the installation. The simple thing you need to do is change the configuration from ICHE to IDE and try again from external usb/drive.
Although laptop makers recommend using windows 7 starter or basic edition for netbook to get best performance, but unfortunately that doesn't happen. I have tried three versions of windows 7- basic, starter and professional. It does run, and you can do things, but will hang in between. The reason being, windows itself is taking ~50-70% of your RAM. So with 1 gb RAM, there is hardly much space left to really work. Even with internet surfing you will see that it stuck many times when there are heavy sites or multiple windows open, as RAM usage reaches more than 90%. I bought my netbook (Asus x101ch) with the hope it will be much easy for me to do simple things like surfing, listening music etc. But, with OS mentioned above its really not smooth. I have found that XP runs much better, faster and smoother. But for the latest netbooks like the one I have, drivers are the issues, you don't get drivers for XP.
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