Can I boot the NSLU2 with a USB device as the root filesystem?
Yes, using the Unslung firmware (version 2.12-beta or later), with either a 1GB or larger external hard disk plugged into either port, or a 256MB or larger flash disk plugged into the Disk1 port.
Make sure you only have one partition on a flash disk, otherwise a external hard disk on the other USB port might not be recognized.