How do I install Ubuntu to a USB key?
Is it possible to install Ubuntu 11.04 to a 4gb USB key and run the OS but when you shut off for it to retain files, settings, etc?
This question has been asked before and already has an answer. If those answers do not fully address your question, please ask a new question.
Absolutely. A USB key acts just like any HD. Most BIOSes these days can boot off them.
I ran my NAS off a USB stick for about a year to keep the power usage down. It's deathly slow however, you will frequently be twiddling your fingers waiting for it to write a file, and you can generally go and make a three course dinner while it does an apt-get dist-upgrade!
There is nothing special you need to do to make it retain settings, you write to it like any other normal filesystem once its installed.