Ok, guy's this is my first try to make a howto.. so bare with me..
I bought a cheap Transcend JetFlash V10 4 gig USB stick and decided to make it emulate linux. I needed this as I have Windows XP at work with a no install policy.
First i tried an DSL-embedded install witch worked as a charm but I love Ubuntu so i decided to try Xubuntu. I could not find a howto so here it is.
First you need to download the latest
I don't know if syslinux acctually is needed if you you only want to emulate as it is an alternative bootloader. Use only if you like boot from usb.
In the command promt (change X: to youre USB drive letter) and restart.
Format the USB to fat32 (right click on usb in explorer).
Extract and copy/paste the qemu folder to the USB flash drive and make a hda.img (virtual hdd).
In the command promt (win+r and cmd):
Install Xubuntu to the virtual drive (hda.img)
qemu-img.exe create -f qcow hda.img 3800M
Still in command promt:
"-boot d" is only for booting the cdrom later you change it to "-boot c" whitch are to boot from the virtual hdd. I used a command-line system install to get it minimum (350 MB without X windows etc). This is all written here. I choosed Thunar, Dillo, Firefox and XFCE (ofcourse). I picked this cause i like blingbling and don't mind little lagg (if to much i go console). not rekommended for slower boxes.
qemu.exe -L \qemu -cdrom path-to-xubuntu-cd-img.iso -hda hda.img -m 256 -boot d
Make a xubuntu.bat file and put it in the root of youre USB.
In Notepad and rename to xubuntu.bat:
In the below Qemu link you can read what all the options means. If you get in to troubble delete the -cdrom with path and you might want to change -m 256 to 64 or 128 the "-m" indicates ram.
REM Start qemu on windows.
START qemu\qemu.exe -L qemu\ -no-kqemu -localtime -hda qemu\hda.img -cdrom path-to-xubuntu-cd-img.iso -m 256 -boot c
Sources i had help from: