Anyone has any tips? Preferably free and ease-of-use, I don't need any fancy features.

Do you mean booting and running a Windows XP operating system from a bootable USB stick, or...?

Booting so I can install it from the USB. Running it directly seems limiting due to the size of USBs, I only have those with 4 and 8GB of size.

If you will settle for Windows XP, there is an excellent live-CD package called BartPE. http://www.nu2.nu/pebuilder/ Instructions for putting BartPE on a USB stick: http://users.telenet.be/Robvdb/BootPEUSB_UK.htm

If you want to use a USB stick to install Windows 7, use RT Seven Lite: http://www.sevenforums.com/tutorials/145343-slipstream-windows-7-sp1-into-installation-dvd-iso-file.html You need an 8GB USB stick for this; 4GB is too small.

I think i tried to set it up before but can't remember, here is a tutorial you might find useful.

http://www.poweriso.com/tutorials/how-to-make-winxp-bootable-usb-drive.htm

I have a good experience with this one:

http://www.winsetupfromusb.com/downloads/

Rufus is the best bootable USB tool I've found so far.