Run the installer .exe file to install XAMPP on the usb drive - in my case a 250GB Seagate FreeAgent Go drive, identified by the OS as drive 'D:\'. The installer proceeded to install everything into a directory 'xampp' that it creates as part of the install - if you go with xampp-lite it will name it accordingly. After that, when you open the Portable Apps menu from the toolbar, go to 'Options' -> 'Install a New App' and direct it to where you downloaded the XAMPP-Launcher*.exe file. During the install of the XAMPP Launcher Portable App, it should automatically pick up the XAMPP install folder and everything should work auto-magically from there. It works with both XAMPP and XAMPP-Lite for me (installed lite, then decided I wanted the full-meal-deal version and deleted lite and installed the full version); the sole caveat being that the XAMPP installer automatically ran the setup*.bat file - if there was an option to tell it 'No' I must have missed it.
That about covers my experience with XAMPP thus far