Since your laptop came with Win98, I checked and I did not find any updated drivers for XP.

 

Try using the Win98 Drivers and see if it works.

 

http://support.dell.com/support/downloads/devices.aspx?c=us&cs=19&l=en&s=dhs&SystemID=INS_PNT_PII_7000&os=W98&osl=EN

 

Here is the link for the Win98 drivers.  Look under "Input Device Drivers"

 

Only other option would be to use an external mouse.

None should be required for that system under XP.  Drivers for such devices on those systems are native to XP, and should be installed automatically.  If it's not working, I'd look for a hardware malfunction, which should show up via the Dell Diagnostics.