This scenario both will and will not work. Ultimately, it seems impractical and it’s not going to help your fundamental issue, which sounds like a hardware problem. I’ll talk about that first.
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Hardware problems
Let’s say you put a clean install of Windows 7 on that machine and update it. If it starts to misbehave like you’ve described right away, I can’t think of a software or organizational solution for you. The machine is fundamentally unstable. It could be a disk issue, RAM, or just about anything.
Unfortunately, that’s impossible for me to diagnose from here. Somebody is going to have to lay their hands on your machine (as I sometimes say) and investigate what may or may not be going on there.
Now, let’s talk about your proposed solution. You can certainly move your data to another disk, but there are a few things that might not work like you expect.
USB/flash memory
I’m not a fan of flash memory-based drives like USB RAM sticks for ongoing data storage and use. USB/flash memory wears out the more you write to it, so you run the risk of one day having a USB/RAM stick that suddenly doesn’t work anymore.
Hopefully, you’ve backed up all your data (because you’re a good Ask Leo! reader who follows my advice), but it’s still an inconvenience to have that USB/RAM stick suddenly not work. I prefer to have actual external hard drives for that kind of a thing.
USB connections
The other thing that will happen is a USB connection is going to feel slower.
The internal drive connects faster to your motherboard and enables a much higher data transfer rate. It’s going to feel a little pokier if you put your data out on any kind of an external device, whether it’s flash or a hard drive.
Newer USB 3 connections might not suffer as badly, but it’s something to watch for and be aware of.
Programs
Unfortunately you can’t move programs that require a set up to install.
Most programs have an installation process that places information in the Windows registry and common areas within the file system. When you remove Windows itself, you’re also removing all that information that was set up by those installation programs originally.
What that means is that after reinstalling Windows you would have to reinstall any program that installs with a setup process. In fact, you would have to run the installation from its original media and not a drive. That pretty much negates the benefit that you’re going after here.
So, I just don’t see the approach that you’ve described as being particularly helpful. I would encourage you to back up regularly, so that you can revert to a prior backup as needed and see if you can fix the hardware issue.
Re-installing Windows has always been the final line of “trouble shooting”. Re-install and malware “goes away”, possible file corruption goes away, re-installing all programs fixes possible registry issues. In general it often “makes things better”, even if you don’t know exactly what caused the problem.
But, installing Windows programs to a separate drive is not really an option. There are a few, small or “old” programs that are written explicitly to be “Portable”. They do not require registry entries or files to be loaded onto the C: drive. You can actually run them from anywhere including USB drives. However, most Windows programs install to system folders and create LOTS of registry entries. Some programs, such as 2010 and earlier versions of MS Office, offer the option of specifying a “custom” location. But even then, they still are hard coded to install a lot of stuff to the C:\ drive, no option. Unfortunately, with the introduction of Office 365, that is no longer an option. The “click to run” virtual environment is hard coded to install on C: .
Rather than installing to USB or other external drive, a better alternative is to “partition your HD”. Subdivide the drive into “logical partitions”. Long ago I settled on a 2 partition scheme: C: for OS and APPS and D: for data. Data includes the Windows personal profile folders like desktop, my documents, pictures, favorites. That way, re-installing Windows will still require re-install of all apps, but at least ALL of your data files are safe. It also gives you the option of creating more specific backup schemes, ie right before and or after the monthly Windows update for the C: drive and more often for the D: drive.