Dell Support has a good interactive page including reinstalling XP. You need to click Troubleshooting and FAQ's and then insert your model and follow the prompts to System recovery etc.
If you added SP2 you can remove it from the Control Panel > Add or Remove Programs list. Click the Show Updates box. SP2 is probably the reason your system is beyond the disk.
You can also format the hard drive outside of windows but then you will lose all your drivers etc. If you do this make sure to copy the drivers first if you do not have a Dell driver CD.