Some "live" distributions have "USB environments" (I call them) which allow
you to create a bootable image complete with a good-sized /home/ space for
data on a USB thumb drive. An example is Knoppix
(http://www.knopper.net/knoppix/), which has a utility just for that
purpose. Knoppix is basically Debian; it is binary compatible. It uses the
LXDE environment, which is KDE 3, but with GTK instead of Qt.
The problem with most (all?) of them is that they're based on the idea
of a read-only partition plus a separate partition that will hold
the changes.
In many cases, this is perfectly fine, but I hate re-installing so
I want to be able to keep updating my "Debian Live" via "aptitude
upgrade" for the foreseeable future (say 10 years).