Just be aware that Windows operating systems, XP in particular, has problems with a lot of USB drives.
I long ago lost count of how many times I got "Delayed write failed when writing $MFT".
I recommend running some fairly heavy stresstests on your computer and drive if you want to use that combination. The best results can be expected if you use a drive with an external power supply.
I can't say anything about the current state of things, though. It's been several years since I've trusted my photo collection to any version of Windows. I now have about 260Gb of photos, which I store in my own database application as well as in files on disk.
Also, I highly second the suggestion from Kurt about using two drives. A good rule is to always have a backup of your work, and to never overwrite your primary backup until you've made a backup of your backup.
Sooner or later things are going to crash at the worst possible time, just when you're making a backup, resulting in both the original and backup being lost.
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