If your computer does not have CD or DVD drive or if your operating system files are corrupt, it is always better to have Windows operating system installed on your USB flash drive.
To install Windows operating system from bootable USB flash drive your motherboard should support USB media as first boot option. When you switch on the computer press DEL or F2 or F10 to enter BIOS setup depending on the type of motherboard you use. Go to BOOT menu and change the option USB STORAGE DEVICE or USB STORAGE STICK as first boot option. In most of the recent motherboards you can select USB STORAGE MEDIA as first boot device.
Click here for procedure to install Windows XP using bootable USB flash drive.