IMPORTANT: Please note this is radically different from the USB images to be released in 8.10 and LiveUSB (idea#16)
In the portable scenario, as the system is actually installed, the loopmounted filesystem can easily defeat the much commented live-usb approach presented by the Fedora community.
AND (this is what made this approach different) the files stored inside the USB partition could be natively accessed from almost any recent system (computer, mp3/dvd player, etc.). Talking about freedom!
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Pseudo-proposal: Install the system and bootloader in a USB flash drive; but, as only allow one partition per external drive, every Windows system will see a "corrupted" partition table and constantly propose to format the drive; and the fs-driver workaround demand a second storage medium or Internet access, so may not be reasonable enough.
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REAL proposal: Add to wubi&lubi the "install to a USB" option (typically FAT32) and additionally allow swapless setup to protect the life cycle of the drive.
The process seems to be simply enough to be easy implemented: install to USB, and install GRUB in the flashdrive instead of change the Windows' boot loader. The swapless under loopmounted, have no idea.