My first thought was no,
By as I sat here at work thinking about it.
step 1: Install windows 98 to a regular hd, on its own partition
step 2: Verify windows 98 has the correct drivers for reading a usb mass storage device
step 3: Ghost it to the External HDD
Thank not me but my friend Alain for the advice

we bouced it back and forth and it was his brain child.