I think the first question is whether or not your laptop can boot from a USB device. If it can't, herein ends the questioning.
However, if it can...
has some information on how to make Damn Small Linux / Knoppix bootable from a USB pen drive. Since your ISO's already small enough, you could
just try uncompressing the ISO onto your pen drive, using `syslinux /dev/your_pen_drive` to create a mbr on the pen drive, plug it in and see what happens
note: syslinux is a linux-only command...I'm not sure how to do something like that in XP. Do you have a friend's computer or something you could run it from?