They are not even necessarily "toy distros". Some are useful for very specific tasks, such as DSL, or some of the network security distros. Let's see someone install a working copy of MS-Windows on a thumb drive.
I just searched Yahoo for "booting windows thumb drive" and several methods came up, the first 2 hits from Tom's hardware and Information Week magazine which should be reliable sources.
Well, I can think of two ways:
-Jump drive holds a qcow or VMware disk image wherein Windows is installed
-XP is installed to the drive via BartPE Builder.