I did try this weekend last. The issue remains that the needed default drivers are not loaded on Fedora boot, even when I re-did my initrd file to include the needed drivers. I ended up with a kernel panic, which means, from what I saw, that the drive was not being read correctly.
I would not do this on a main production system. The chance for error (not being able to boot your XP system on the thinkpad) is too high. If I find a solution, I will post it. Grub will need to reference the usb external drive and this is too dangerous to chance.
I did not install to the MBR, as I did not want to chance this on my production system. Instead, I did what I do not recommend, I attempted to boot straight to the usb drive, using Grub installed on the MBR of that drive. This kept Grub off my main hard drive to test the process.
I got a Grub boot screen, but a kernel panic. This means that the bios booted from the usb drive, but the drive was not read properly to load the Linux root filesystem.
Until then, if anybody else has the solution, please let krispenmetsa know.