"...would we be able to install windows xp pro on the external hdds and boot to that drive?"
Yes, you should be able to if your motherboard supports booting from a USB drive, & it's setup in the BIOS to do so.
"what i mean is can i play those really old games that are built for 98 or lower that are playable using compatability mode using xp mode?"
I can check this out & get back to you. I'm using Win7 Ult, so if you give me examples of such games (which are free to download), I can try them out in XP mode. G