I installed Skyrim onto a USB, its connected. However when I play the game, the disk is still spinning, ie its still reading straight from the disk. I'm only asked if I want to use the USB for game save storage. How do I get Skyrim to play from off the USB??? Do I need to also install it on my HDD?

The disk always spins for the first few minutes to make sure you aren't a pirate.

Minutes you say. That may be it than if its different for flash drives. I never heard it spin with my HDD.

(EDIT)

You were right my good sir. It did stop spinning after a couple minutes. That seems kind of odd though, you would think they could verify its a legitimate copy on startup. Anyway textures are perfect, my xbox wont overheat, I am happy.

The disc spins because it is one of the new format discs.
It does it for MW3. It also starts to spin up every time you switch between Spec Ops, Campaign and Multiplayer.