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An optical drive can be connected by usb to install, but the installation may be a little more complex than just that.  When installing Xp on newer laptops, it is frequently necessary to feed in SATA drivers early in the process using a floppy drive, which netbooks don’t have.  Many netbooks with the Atom processor will accept SATA drivers (available from Dell) for their intel chipsets.
What can make the process difficult or counterproductive is the drive itself.  If this netbook had a true harddrive, there is a way of making installation possible from the drive itself, however some netbooks have solid state drives (similar to thumb drives) which can have as little as 4 gig of space (minimal for Xp) and leaves no room for the installation files.

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 February 1, 2010