This seems to be dragging on and you don't seem to have got any further forward.
You have the luxury of two hard drives so you can install a dual boot system very easily.
Before you start you should download all the latest drivers for your PC from the Dell website. Store them on your D: drive but under a folder at the root level, not under documents and settings on the C: drive (D:\Drivers for example). This is easy if you have the Service Tag. Go
here and enter the tag and select your model number.
Once you have these you are safe to install MCE. During the installation you will be prompted to select the drive to install to. Make sure you select the D: drive, if you don't, you will be screwed! You will be also asked if you wish to leave the file system as it is or format. Best you leave it as it is! If it finds your existing installation, tell it you wish to install a new one.
During the install you will probably be prompted for the XP Service Pack 2 disk. Ignore this irritating mistake and just insert the second MCE disk. When prompted again, re-insert disk 1.
When you've finished you will get a choice of both installations with a timer counting down from 30 seconds until it loads your new installation.
I would advise you to make sure that your second drive is D:. If you added it later you may find your CD/DVD drive is D:, as long as you haven't installed any software to D: and it only contains data you will be safe to change the letters around. I'd make the optical drive V: or W: but you can use whatever suits you.
Dave