Please follow the below mentioned steps.
The first thing you need to do is reseat the optical drive and to do the same please follow the following link
<ADMIN NOTE: Broken link has been removed from this post by Dell>
After reseating the optical drive do check if the system boots using a bootable disk. Bootable disk would be your operating system disk.
1. Turn the computer completely off.
2. Restart the computer and start tapping "F12" key at the first Dell logo screen.
3. You will see one time boot menu listing a couple of options to boot the computer from.
Note : You may or may not see the one time boot menu depending on the Hard Drive content. If you don't see it the first time, please repeat
the steps above. If you still don't see it, you probably need to change the boot sequence in the BIOS and boot off the XP cd.
4. Insert the Windows XP CD in the drive now.
5. Select "CD/DVD" option from this screen and press "Enter" key.
6. The computer will display a message asking to "Press any key to boot from the CD".
7. Press any key on the keyboard immediately as you will have only 3 seconds to press a key.
8. Now you should see a blue screen with Windows Setup written on top.
***Please check for the same by following the above mentioned steps and then mail me back the results***
I was just gng through your reply but then you didn't mention what was the result after you tried the steps that I gave you earlier. Please let me know of the same soon so that I can suggest few more steps that you can go for.