Can I compress Mac OS into portable drive?

You cannot compress the data or you would not be able to boot from the disc nor install OS X properly. However, you can put the OS X installer disc onto an 8 GB USB flash drive that can be used to boot any Intel Mac.

You can also partition an external hard drive and install different operating systems on each partition.

One way to avoid the "one wrong move and it's gone" worry is to have backups.

I guess I'm reticent to say more until I clearly understand what your goal is. When you speak of partitions do you mean on another hard drive? Do you want to create a backup of a partition on one drive to a partition on another drive? How many partitions are involved on the source drive? Do you know how to create additional partitions on the external drive? Before we worry about careful measures, perhaps you can carefully explain what you want to accomplish with as much relevant detail as possible. Then I will be in a better position to offer a workable solution.

I've spent some time in Burlington. If it weren't winter I'd suggest going for a walk lakeside! If I get your problem solved will you send me some Vermont maple sugar candies? Absolutely delish.

Well, then, if I understand you have Mac drive with more than one partition on it that you need to backup to the external drive. You will need to initially partition the external drive using GUID with each partition formatted Mac OS Extended, Journaled. You then want to clone each partition on the main drive to a corresponding partition on the backup drive. The basics are:

A. Repairing the specific volume and permissions

Boot from your OS X Installer disc. After the installer loads select your language and click on the Continue button. When the menu bar appears select Disk Utility from the Utilities menu. After DU loads select your hard drive entry (mfgr.'s ID and drive size) from the the left side list. In the DU status area you will see an entry for the S.M.A.R.T. status of the hard drive. If it does not say "Verified" then the hard drive is failing or failed. (SMART status is not reported on external Firewire or USB drives.) If the drive is "Verified" then select your OS X volume from the list on the left (sub-entry below the drive entry,) click on the First Aid tab, then click on the Repair Disk button. If DU reports any errors that have been fixed, then re-run Repair Disk until no errors are reported. If no errors are reported click on the Repair Permissions button. Wait until the operation completes, then quit DU and return to the installer.

Repeat the above for each partition you will be backing up. Permissions repair is only needed for a partition on which you have OS X installed. If you have different versions of OS X (say Tiger and Leopard) then you need to repair permissions using Disk Utility while booted into each respective OS version.

If DU reports errors it cannot fix, then you will need Disk Warrior and/or Tech Tool Pro to repair the drive. If you don't have either of them or if neither of them can fix the drive, then you will need to reformat the drive and reinstall OS X.

B. Clone using Restore Option of Disk Utility

1. Open Disk Utility from the Utilities folder.
2. Select the destination volume from the left side list.
3. Click on the Erase tab in the DU main window. Set the format type to Mac OS Extended (journaled, if available) and click on the Erase button. This step can be skipped if the destination has already been freshly erased.
4. Click on the Restore tab in the DU main window.
5. Select the destination volume from the left side list and drag it to the Destination entry field.
6. Select the source volume from the left side list and drag it to the Source entry field.
7. Double-check you got it right, then click on the Restore button.

Destination means the partition on the external backup drive.
Source means the partition on the internal drive.

Does this answer you question?

Cloning is simple and preferable to trying to create a disc image file. It also produces a bootable clone on the backup which means in an emergency you can boot from the backup.

BTW, you can purchase replacement discs for your computer's software restore discs. Call AppleCare. The cost is very reasonable.