ha yeah sorry this is the logical volume I mean to set active
1 Extended Partition + 1 Logical volume
&
1 really small primary partition like 100Mb and active
Forget about the Logical volume made active, I just tested again with a small primary partition made active and this was enough to have winsetupfromusb detecting the USB hdd
To resume how I do it:
1) my usb stick has no partition
2) doing 1Gb extended partition
3) inside a 1Gb logical volume
4) a small 100Mb primary partition inside the unpartitioned space
5) set active the primary partition
6) installing grub though grubinst
7) Copying XP setup on logical volume through your SetupwinfromUSB program
8) moving some boot files from the primary part to logical drive
9) deleting primary partition
At this point the install hdd is ok
10) copying HBCD from Hiren's BootCD 10.0 iso to logical drive
11) adding the code below to menu.lst
At this point the install hdd is ok + hiren boot cd to install the loaders to our futur C:
then I reboot
12) TXT setup
13) to the partitioning options you should see only ONE partition, our USB HDD (logical volume) is shown down with a letter D:
14) create the C: partition to your disk (should be shown first)
15) create a small partition inside the unpartitioned space of your usbhdd (windows will tell you it anyway because it refuses to write boot files to a logical volume)
Then to the reboot, poweroff, reinstall grubinst to the USB HDD, reboot with it and the second step starts
Setup may then warn you it fails at finding HarddiskVolume2, just set instead Harddisk1/Partition2 and its works perfectly
finally copy boot file from the small primary partition you created during setup and install an MBR to the C: with Hiren bootcd.
Hope it helps I made that quickly I need to eat

so yesterday I had done to get the logical volume detected in setupwinfromusb tool without having to create a fake primary part and moving boot files but can't remember yet how I did, will post if I remember