Since I had a faulty HDD (see previous posts) and Windows was becoming unbearably slow, I went out and bought a 120GB SSD (OCZ Vertex 3) for $90 (was on sale, originally $160).
Installed Windows 7 home premium and Diablo on it ... and ... all stuttering is gone.
Previously, in some acts (ex: ACT3-prime evil) I used to get some occasional stuttering because the game was accessing some other files outside the Diablo installation directory (post 1.0.3 patch), so even with the Flash disk method (OP), I would stutter when these files were accessed.
Now, with the SSD, even when these files are accessed, I experience no stuttering.
My Diablo RRT is between 0 and 2m, with an average of 1ms or less.
HD-Tune-Pro reports an average 0.14ms response time.
My Windows is significantly faster now, even browsing and youtube has become a whole new experience. It really feels like I bought a new laptop.
Honestly, now, I would choose a 60GB SSD over any 500GB HDD (comparable prices).