only Intel-based Apples can be booted from USB. PowerPC-based (G4, G5) can only be booted from firewire. you also have to make sure that you use the correct partition scheme - if you're using Disk Utility, it will walk you though the options for Intel or PowerPC-based systems.
i have a MacBook Pro and use Carbon Copy Cloner to keep a clone of my internal drive on an external USB drive. it works great!
4 G5s, OSx 10.4.11, Final Cut 6.0.2, Kona LH (v5.1)
Xsan: Xserve 2.0 G5, 3GB RAM, 2 7TB Xserve RAIDs, Sanbox 5200
decks: Sony HDW-M2000/10 HDCAM, HVR-M10U HDV with HD-Connect, DSR-1500 DVCAM, UVW-1800 BetacamSP
MacBook Pro: 2.33, 2GB RAM, OSx 10.4.11, Final Cut 6.0.2
cameras: Panasonic HVX200, Sony FX1 and A1U, Arri S/B 16mm
skis: Volkl Gotama 183s with 914s and Lange Fluid 120 boots