Yes it's possible. The lappy I'm using to write this is older than that. I did exactly what you're suggesting, i.e. stick the drive in an other machine and install from there. I reckon you'd be able to hack something up with just about any distro, but I went for Backtrack. It's got a nice 'live installer' that's meant for installing onto a usb stick. It works perfectly well for another drive, plus the distro is designed to work on a wide range of hardware, and detects everything at startup.
Plug you drive into your working machine, boot up backtrack then install it into the laptop drive. Stick the drive back in the laptop and it should (famous last words
) just work.
I installed gentoo on it first, but with only 4gb disk, it wasn't workable. And build times were a nightmare.
Hope this inspires you to try it. My lappy runs fine now, at least for browsing the web and email.