Ive purchased the Sold Out version which includes Worms 2 also. I can install it fine on my main PC but want to install it on my EEE.

Questions -

The EEE has an Intel chipset & graphics so what patches can and cant I install?

The EEE has no cd or DVD drive. Is it possible to get it to work without CD?

When I try installing it off an external USB cd drive I get an Error #5 code?

Help. I love this game.

The EEE has an Intel chipset & graphics so what patches can and cant I install?
The latest beta update (v3.6.28.0 (http://wa.team17.com/main.html?page=supp&area=upda&file=15)).
The installer will automatically download any missing files if necessary (i.e. if your version isn't already v3.0, which the Sold-Out version normally is), so you might need to have internet access during installation.
If that's not possible, install the old patch first (v3.0 (http://wa.team17.com/main.html?page=supp&area=patc&file=11)).
The EEE has no cd or DVD drive. Is it possible to get it to work without CD?
http://worms2d.info/Running_WA_without_the_CD
This should also work on an EEE PC. Tell us if it does.
When I try installing it off an external USB cd drive I get an Error #5 code?
No idea what this code means.
No external drive needed with the solution from the link I posted.

Do I install the game first on the drive and then install the updates?

Will this cause a problem with loading the game as per your link above ?

install game then patch/update.

Do I install the game first on the drive and then install the updates?
The tutorial tells you about how you set up a virtual CD drive where you can mount CD images.
After that it's exactly the same as if you would install the from a real, physical CD drive.
Will this cause a problem with loading the game as per your link above ?
No.
If Daemon Tools (for Windows only) runs properly on EEE PC, you should be able to simply copy a CD image of the WA game CD (created by some CD burning software, like Clone CD or Nero) to your EEE PC's flash HDD via an USB flash drive for example.