|The normal answer is that windows may or may not allow that as you state it.|
Two issues really. One is you installed stuff with links in registry and maybe hidden or unmoveable files on C or D.
Saying that I have done it. A simple ntbackup and restore to different location and then edit registry for a week might do it.
Other way would be to create a virtual machine from your system and run it off the usb drive as a virual system.
"Best Practices", Event viewer, host file, perfmon, antivirus, anti-spyware, Live CD's, backups, are in my top 10