Ars Technica’s open source journal has news and links to running a modified Xubuntu 7.10 off a USB flash drive on an Eee laptop. The installer still works too, so installing permanently is an option.
Creating Your Own Custom Ubuntu 7.10 Or Linux Mint 4.0 Live-CD With Remastersys | HowtoForge – Linux Howtos and Tutorials
HowtoForge has instructions for building a custom LiveCD out of an Ubuntu based system.
This guide shows how you can create a Live-CD from your Ubuntu Gutsy Gibbon or Linux Mint 4.0 system with a tool called remastersys. Remastersys is available in the Linux Mint romeo repository. You can customize your Ubuntu/Linux Mint system and then let remastersys create an iso image of it which you can then burn onto a CD/DVD.