I've always read that installing an operating system, regardless of Windows XP or Linux, on a SD card in the Eee PC is possible. But I haven't got the chance to prove that - until now.
The Eee PC that I had to work with was installed with Windows XP. The requirement was for SUSE Linux to be installed on a SD card so that users have the option to work with either Windows XP or Linux.
The process is really the same as that with the SSD on the Eee PC. You just have to be careful when choosing the drive where the OS should be installed since the system assigns the device names (/dev/sda or /dev/sdb) arbitrarily.
Furthermore, I chose to install the boot loader on the SD card instead of the SSD. This is to prevent the situation where the user forgets to put in the SD card and chooses to boot up Linux - and panics when there is a problem. PEBKAC.
Interestingly the boot loader, GRUB, doesn't seem to work when I chose to install it in the ‘/boot’ section. I had to install GRUB at the master boot record (MBR) of the SD card. Another quirk is that the entry in GRUB to boot Windows also does not work. I suspect it has to do with the naming/ordering of the devices. Alas I did not spend more time investigating. The easiest and friendliest method is to remove the Windows entry in GRUB and make the user press the Esc key during bootup to choose between the SD card (Linux) and SD card (Windows).
Another interesting fact - the SD card can be cloned, which means that to have another OS running off the card, you don't need to go through the installation process. You can simply clone it with the dd command. And guess what? Compiz, Wifi, everything works the same. You can now grab the card and run it off another Eee PC with the same specs and it works! How cool is that?! :)