According Microsoft, "Universal Serial Bus Devices Do Not Work in Safe Mode" under XP. However, in my testing this is incorrect. USB keyboards, mice and flash drives seem to work fine in safe mode (I made sure the BIOS was not providing support). This makes sense because a failure of a standard input device would be, in Microsoft parlance, a "bad user experience".
So, Is USB supported in safe mode on XP?
If your answer is no (agreeing with Microsoft), please provide a test case, preferably in a virtual machine, where a standard HID keyboard or mouse fails. Please state hardware / BIOS / OS configuration. Note that you will need a PS/2 keyboard attached in addition to your USB device(s) in order to use the boot menu. Virtual machine software usually emulates a PS/2 keyboard. Alternatively, you could add the /safeboot switch to boot.ini.
If your answer is yes, please provide a link to some supporting documentation (either from Microsoft or someone authoritative).
Your answer might be "devices X, Y and Z are supported but nothing else", in which case also give a link.