Both Vista and XP can be installed from a USB pendrive.  There are many articles on the web explaining how to do it.     Here are a couple of XP guides:  Installing Windows XP Using A USB Flash Drive / Installing Windows XP on a PC using a USB flash drive.   For Vista... there are so many guides available, I might as well just provide a link to all the hits from a Google search for 'InstaIling Windows Vista using a USB drive?'.
I received a Dell Mini from a media provider as a gift for switching my media services.  I would like to do a clean install of the OS.  The mini came with the OS and driver CD's, but the computer does not have a CD/DVD drive.  Before undertaking this endeavor I want to make sure I can do it this way.  Can I copy the contents of the CD's onto a USB drive and install the OS and drivers from the USB drive (I have a Desktop that I can transfer from the CD to the USB)?  Or is there another method to do this.  Thanks for any answers.  
how to reinstall an OS on a Dell Mini without CD/DVD drives