Not all USB thumbdrives are created equal and I've noticed that some places are having 'fire sales' on known slow USB thumbdrives now that Vista has launched. One thing I can recommend is getting a thumbdrive that is large enough to move your profile onto and use for ReadyBoost. You could also go one step further by moving your user TMP and TEMP environment variables to your thumbdrive.
Pros:
Faster program launches
Less chance of profile corruption because it is solid state technology
Less hard drive fragmentation, due to temp files offloaded to another drive
Less power consumption on laptop, due to less hard drive head seeks
Cons:
If you forget your thumbdrive, you will be forced to log onto a temporary profile on your hard drive.
If you unplug the thumbdrive before properly logging off, you might end up with a very upset OS.
Premature 'wear-out' of the thumbdrive. Typically by the time you get bad sectors on flash memory, you have already retired the device.
Local profile size is limited by the size of the thumbdrive. This is normally not a problem unless you have a bad habit of saving downloads and files to your desktop. I used to be guilty as charged until I changed my ways.
So far, the pros have outweighed the cons and I'm enjoying the experience so far. I will document the process later this month, hopefully.