I thought I'd post my experience here, for the benefit of others, because I couldn't find a whole lot of information about this specific use of an external USB flash drive.
I have a MacBook Air with a dainty 128GB SSD drive, so I try to keep large files that I rarely use on external drives. I have plenty of external USB and FireWire storage (over 6 TB), and running VMs in either Parallels or VMWare Fusion works great (very highly performant) off any of these external drives.
However, there's no way I'm going to lug around an external hard drive and USB cable (and maybe power adapter) just so I can test things in Internet Explorer (basically, the only use I have for Windows).
Flash Drive to the Rescue!
I found a cheap 32GB USB flash drive that only sticks out of my MacBook Air half an inch, and copies at a consistent rate of 30MB/second (which is quite sufficient for most tasks). Also, the little drive should have very good read performance, since it's not a spinning platter. Write speed wouldn't be anything to brag about, but writing shouldn't happen all that often when simply opening up Internet Explorer—I hope!