We used a WD 1600PB 7200 RPM IDE harddisk for our performance tests.
The pictures show the transfer rate from beginning of the disk (left), to end of the disk (right).
The first picture is transfer rate over USB, the second one is transfer rate when directly connected to the IDE controller.
As was to be expected, the USB interface is the limiting factor here. For easier comparison, the yellow line marks the average transfer rate of the HDD via USB interface. Near the end of the HDD the USB transfer rate almost reaches the HDD transfer speed.
The added latencies of the USB interface and the USB-ATA converter chip do not add much to seek times. An extra 0.5ms access time might be measurable in benchmarks, but will not affect real world performance at all.
We tried booting from the USB HDD and it worked fine. All you need is a BIOS which supports boot from USB device.