It should work. You might want to search this site for "thumbdrive" for examples. To get ntldr to load in linux, first you need to select a partition for lilo rather than the mbr. Then using the "dd" command, the first 240 bytes of the partition are copied to a file. This is the file that the ntldr loads in to transfer control to lilo.
You may be able to put lilo on the MBR and use lilo to load in either linux or NTE. I've never had problems with this when installing linux on my XP laptop. Sometimes I had a problem with the desktop however.
Please check whether lilo or grub can load in the kernel and initrd file from a thumb drive. It may depend on the version os lilo or grub that you use. The usb modules are either in the kernel or initrd file, and lilo/grub needs to read them from the thumbdrive.
Another possibility is that the computer's bios supports usb booting, and you can simply enable it in bios and change the boot order.
It may make sense, since this is a thin-client appliance, to use this computer as a X terminal and have the programs running on a Linux server. (Assuming you have one on the network.) I believe that there is a thin client how-to on the
www.tldp.org website.