There are all sorts of options for backing up systems/files. You need to review some basics, then decide in which direction you want to go. Plenty of software options available.
Backup Options - http://www.onecomputerguy.com/install/backup.htm
Implementing a backup strategy - http://www.pcug.org.au/boesen/Backups/backups.htm
My interpretation, may be incorrect but...
When XP begins the boot process, an inventory is conducted quickly of connected components. If a component is connected (such as a USB-connected drive) and powered on...I believe that XP sees it as a potential boot device (what other reason could it be powered on for, at this stage?) and this tends to stop the boot process, while XP tries to figure out what is going on (siince it's not a boot device because it has no Windows install).
The simple solution is to turn on/connect USB-powered devices after the boot process is complete.