Not sure what to do with dual boot & external drive

Hi-

I now have a dual boot system with Ubuntu and XP and the bootloader is GRUB. One option for me is to create 2 more partitions with gparted and load Win 7 and W98SE. However, I don't want to do this as I've looked on forums and it could get complicated with the bootloader (errors etc.)

Another option is to get a USB flash drive and make it bootable (how?) and install Win 7 & W98SE. Again I don't know too much about this.

The third and probably best option is to use a USB HDD drive.

I would like to know if I can install an external HDD, boot straight from it, completely avoid my dual boot HDD and install Win7 and 98SE on the external drive, while keeping my normal HDD on the laptop. It's imperative that I can do this as I don't want to mess up my existing system (ie. wouldn't mind sleeping at 2am and not having software issues).

Thanks for any advice on the best way of doing this... (By the way my HDD is an IDE on a 2005 Toshiba laptop)