The important thing to remember is that solid state drives (including USB thumb drives) have a limited number of read / write cycles, so how bad it is for the USB drive really depends on how much the OS thrashes the disk (DSL for example barely touches it if at all - runs all in memory.)
However, you're really just talking in the realms of a slightly reduced lifespan for USB drives heavily used in this way - it's completely safe and won't just kill it. I've used loads like this over the last few years and with the exception of a couple of old ones, they're all still going strong.
Write cycles, sorry - not really read (not entirely with it today!)
But no, they don't last forever. We're slowly getting to the point where there's so many write cycles available we'll never run into them, but we're not there yet.
You are more likely to ruin your USB drive by 1) losing it, 2) putting it through the wash, 3) having it stolen, or 4) running it over/stepping on it...than you are to run out of write cycles.
It's perfectly safe to run an OS off a USB drive it is also easy to transport with you! But all joking aside it won't really reduce it's life span at all, it might run a bit slower because it's running off USB.