Well, hello and welcome.
Maybe I'd start by getting the OEM diags for the hard drive. See the OEM web site of the company that made the hard drive.
There is an edit feature that would have worked better. This site uses a zero reply list for some people to find posts that don't have someone helping. Anywhay.
You have many many choices.
One is to boot to some floppy or usb to download a live linux each time you power up.
Not a normal way but an option. See www.netboot.me
and there are some others like slitaz.
Two is your usb. Most newish systems can use a usb flash or usb external just as if it were an internal drive. Most of the distro's posted at www.distrowatch.com
can do that one way or the other.
Three is to boot off a local system.
For a usb flash, one of the most simple might be to make a LPS flash. It has most of all of what you need. http://www.spi.dod.mil/lipose.htm
There is batch file I think that creates your usb from a windows box. See the read me files. I tried it last week on an old 1G and it ran great.
Many people start off with a Live cd sort of usb. It is an in between sort of install. It is a live cd/dvd that is made to work on a usb flash. One advantage is that you can get usually a 1G usb to hold 2.5G worth of linux. See tools on the distro web site like Fedora's live usb creator or many ideas at www.pendrivelinux.com
Decide on what you want and maybe we can direct you more clearly. Also post how much ram you have.