First thing you need to do is back up everything that want to save. Things like:-
My Documents
IE Favourites
modem/broadband settings
email account settings
You'll need to copy key items off to an external drive or burn them to an optical disc. Think carefully about which items & settings you need to keep.
Depending on the age of the system the Dell Windows CD will possibly have SP1 or SP2 slipstreamed onto it. It may be shown on the CD label if it is bare windows or SP1 etc. The Dell resource CD will have all the relevant drivers although some of these may have been updated since purchase.
Now depending on your resources you could download the full XP Service Pack 1a and Service Pack 3 files from
www.microsoft.com/downloads and burn the two on to a CD. SP3 will only install if SP1 is already installed.
Once you have checked, and checked again that you have backed up everything you can then install XP from the CD. Put the CD in the drive and reboot, during BIOS POST press F12 to get into the boot menu - if that doesn't work you may have to reboot and press F2 to get into the BIOS and alter the boot device to the CD drive. Boot from the CD and it will scan and detect an existing installation. You need to follow the on-screen prompts and choose to 'quick' format the C: partition and install there.
When Windows has installed you want to get SP1a & SP3 installed asap. Hence the thing about downloading and burning to CD. Now you can check in Control Panel->System->Hardware->Device Manager and see what devices need drivers. You can now load the Dell resource CD and let it install. It will then run and identify your hardware and version of windows and list the relevant drivers for the hardware it detects. You can then install them now and later check for updated ones from the Dell support site.
Get your anti-virus and other security programs installed and get your modem/broadband connection up and running. Once you are online go to WindowsUpdate and choose to have MicrosoftUpdate instead and then install all the critical updates. Check the recommended and hardware updates too for anything relevant. You can get IE8 at this point if you like.
Now you can start installing your apps such as MS Office/Works and other apps you want. Don't install anything you don't really need.
Once you have installed any MS apps do another visit to MicrosoftUpdate to get all the hotfixes. Often you need to do a couple of visits as some fixes are dependent on prior fixes etc. Also, update all your AV and security programs before contemplating browsing etc.
Now you can start to bring back your documents etc etc. Install other devices such as printers, cameras etc but leave a break between them so that you can test the system shutsdown/starts ok. Each time you add a device etc a recover point is created so hopefully you could roll-back if needed.
Let us know how it goes and don't hesitate to ask any questions.