I installed in my Slackware 13.1 with generic kernel 22.214.171.124-smp VirtualBox packages taken from SlackBuilds.org (acpica, virtualbox-ose and virtualbox-kernel). Then for testing purposes I installed in VirtualBox Windows XP using CD-ROM drive connected to USB port. Its a lot of fun to see Windows as an application in Linux!
I have successfully booted from GRUB before on a flash drive but the /boot partition was on the hard drive. My planned layout: 20 gig encrypted /root, 156 gig encrypted /home. I do not use swap, I'm trying to put GRUB and /boot on one flash drive. I have tried the above setup and splitting my flash drive into two partitions one with GRUB and the other /boot.