This is UNIX, so it's certainly possible.
A few people ran into this method by accident when PB was first released, actually. If you had a volume named "Applications" your Applications folder would seem empty, because it was trying to use the blank volume rather than the real folder. So all you'd have to do would be this:
1) Copy everything from the folders to the drives you want to use. They CANNOT be named Applications and Users yet if you're in OSX, or you won't be able to see the directories to copy the stuff from.
2) Rename the drives to "Applications" and "Users" respectively (note: you must boot into OS9 to do this). While you're at it, you can now delete everything in those folders on the root drive, but don't delete the folders themselves.
3) Reboot into OSX and you're done.
Note that this is an incredibly skanky hack, and not one I would reccommend. The problem is, I'm not sure of the "clean" way to always mount /Applications and /Users as separate volumes in OSX (I can do it in Linux, but NetInfo throws just about everything for a nasty loop).
Note: because of the way Unix works, the /Applications and /Users volumes will still look like ordinary folders. This is one of the things about Unix: there's no concept of drives as such. There is only one filesystem. Separate drives get mounted as directories within that filesystem (the one you boot off of is mounted as the root), and they look just like ordinary folders to the user. You can mount a drive at any point in the system, so long as there's a folder to mount it as.
[This message has been edited by Millennium (edited 03-13-2001).]