It sounds like the entire Operating System is corrupted.  I assume it will not load Windows normally either because of the corrupted update.  Do you get anything if you do not use the F8?  Do you get any options such as "last known good configuration" or something similar?  If not, you will at a minimum have to boot with the Windows XP CD and do a Repair operation with the XP installation CD and ultimately you may have to completely reinstall.

Are you hitting F8 at the correct time?

F2 and F12 need to be pressed while the Dell splash screen is being displayed, just after powering on the computer.  To get to the Windows start up options, however, you need to press the F8 key after the Dell splash screen, but before you get the "Windows is starting" message.

You didn't mention you had talked to Dell support before, just MS (Microsoft). 

If Dell support thinks it's a motherboard problem are they going to replace it? and if they are, no use doing anything else or trying to troubleshoot anything else until the motherboard is replaced.

I worked with dell last night after no solution since Sunday. No replacement since old computer. Believe

me I have been trying everything and no luck. So have to take next step.

Can you boot with the Dell Windows XP CD?  If you can, that would also suggest Windows XP is corrupted with the failed SP3 install. 

There is a "Recovery Console" procedure   HERE and you can try that.  If that doesn't work a Repair would be my next suggestion.  How to run Repair