Hi Ryan,
Please clarify your setup ( including OS )
Yes, you may use External USB floppy drive to store IDR information.
Floppy and CD devices cannot be external PC-card drives. Because external PC-card devices are not supported during the GUI-mode Windows Setup phase, they cannot be used to access data, and recovery cannot be completed.
As you have an external USB floppy drive, while restoring you will boot the CD.
Then press F6 to load external USB floppy drive drivers so that it recognizes the FD. You may then carry out restore process by pressing F2.