I don't have an Inspiron on me so can't say what the exact key combination is to get into the recovery partition, but it sounds like you already tried that.
Like Biohead mentioned, you may want to make sure that recovery partition is still there on the hard drive. (it's possible someone may have reformatted the entire drive at some point) Usually I'd just boot up a Gparted live CD & see if all the partitions are there. The built-in Windows Disk Management might work too, though I'm not sure if it always shows hidden partitions.
There are a few ways to get a recovery partition to boot up.. in a pinch you may be able to use GParted to set the recovery partition as the "active" boot partition so when the system boots up it'll just boot into it directly. You should try other options first, that maybe be more of a last resort
(I've done this on Lenovo laptops when they refused to boot into the recovery partition)
It's way easier to just re-install Windows XP. If you can find an generic XP Pro/Home OEM disc you will be able to re-install using the XP key from the sticker on the laptop. Windows will need to be activated but that won't be a problem, it'll definitely activate.
Or even better, just about any OEM XP disc from Dell would re-install Win XP on the laptop without any hassles. Just make sure you get the right XP disc (Home vs Pro).