how to make xp bootable through pen drive Why?
It can be done...however:

A) You will need a better than average experience with using command line arguments...
B) It will only run on the machine you create it on...
C) It runs pretty slow due to USB transfer speeds...
D) You'll need about a day and a half to spare to create it...

In short
Yes it can be done
Mostly it's a waste of time and effort...I can imagine creating a bootable pen drive that would substitute for a floppy, for use in a situation of e.g. damaged or missing ntldr, but installing XP on a pen (or any other external) drive is very very difficult verging on impossible. Out of the box XP REQUIRES an internal HDD. So hence I asked "Why?" to try to find out the OP's requirement.

Gotcha...
I've done this twice myself...just to work out that it CAN be done.
However it serves no practical PURPOSES...
The difficulty in doing this was actually by design starting with XP...Gates didn't want a ton of copies of his new OS floating around out there on bootable USB devices...hence the roadblocks in making it simple...i agree with both of you guys. I think a better solution would be BartPE or *CENSORED* Small Linux if you want to run an OS via pen drive to do repairs, but there is no sense in RUNNING full time. And hard drives are much bigger