A qualified yes. It must boot off an SD card with the GPU firmware and a bootloader or linux kernel on it, but once that"s done, it can chain boot off any device the initial bootloader/kernel has drivers for. That includes USB sticks (and USB HD, network, ...)
Excellent. I will let the Sugar on a Stick people know. This is the Fedora Linux remix of the Sugar education software for One Laptop Per Child on a bootable USB drive. An ARM version is in the works.