To make the horseradish sauce, combine all of the ingredients in a small bowl and let stand for one hour for the flavors to blend. Serve at room temperature.
Heat enough of the penaut oil on the kitchen stove over high heat until the oil is ready to fry (test by sprinkling a few drops of water in it; if it spits, it is ready). Pour enough of the oil into a metal fondue pot so that it only comes halfway up the sides of the pot. Keep the pot over a high flame or high heat (if electric).
Allow guests to cook their meat with their fondue forks and serve with the horseradish sauce.