To install XenServer on USB drive, complete the following procedure:

Disconnect or disable all hard drives, except the USB drive
If you do not disable or disconnect other drives, you have to adjust the device name (/dev/sda1) that are used in the following commands
Download the Citrix XenServer 6
Start installation of XenServer 6 Refer to the installation user guide for more information about installation

After the installation, boot from the XenServer 6 installation CD again and

press F2 when "Welcome to XenServer" appears. (Advanced Setup)

Type "shell" and press enter to get into command line interface

Run the following commands:
# mkdir /target
# mount -t ext3 /dev/sda1 /target
# mount proc /target/proc -t proc
# mount sysfs /target/sys -t sysfs
# mount --bind /dev /target/dev
# chroot /target
# cd /boot
# ls –al
# mv initrd-2.6.32.12-0.7.1.xs5.6.100.323.170596xen.img nitrd-2.6.32.12-0.7.1.xs5.6.100.323.170596xen.img.old
# mkinitrd --with-usb initrd-2.6.32.12-0.7.1.xs5.6.100.323.170596xen.img 2.6.32.12-0.7.1.xs5.6.100.323.170596xen
# exit
# reboot
Remove the CD and start from the USB drive

Important Note: The initrd file name is the exact file name as in XenServer 5.6 Service Pack 2.
If you choose a different version of XenServer, you have to adjust the file name and kernel version to generate the correct initrd.
It has been tested and does work on XS 6.0.201