With the free PE Builder of Bart Lagerweij, you can create a Windows XP (BartPE) which runs from CD, which doesn't need a hard disk. It's like the Windows Preinstallation Environment (Windows PE) of Microsoft, but this system isn't free.

The possible applications of such a system are manifold. For example often BartPE is used to rescue data.

Since version 3.0 PE Builder supports plugins. With plugins you can add almost everything, which is not included in PE Builder.
The current version 3.1 has got a clearer user interface and makes adding of drivers easier.