USB flash drives and external hard drives were not supported in the Beta, so I doubt they will be supported for retail. That's just speculation though. My theory is that the USB read speeds are too slow for the user to have a smooth experience while playing the game. Again, just my personal thoughts. :)
If you're playing a disc, the extra install should be somewhat minimal, especially for last gen platforms. Just make sure you have an internal drive at launch to be safe!
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What they said ^