It boots on the USB. It just displays C: prompt(the USB disk). cannot start any XP. The floppy used was made using XP's format and USB stick was formatted as FAT with HP tool using ploppy to generate boot partition.
At the C: prompt I can use the USB stick. The computers internal disk isn't visible from the c prompt.
I have used Bart PE builder, but I can't find any windows folder. The article doesn't indicate any need for additional files.
Edit: But a folder (minint) containing i386, inf, system32 and WinSxS is on the disk