If what Dell sent was a true XP Home Editon Upgrade CD, then yes, you
should be able to do a clean install with it, ASSUMING you also posses a
CD from a "qualifying product". Your description sounds like this is what
dell sold you. Does it have a setup.exe and an i386 folder in the root?
If they sent you a "XP Home System Restore Disk" then that disk will ONLY
work with it's intended system - it's designed to restore the original
as-from-Dell image. Typically these ONLY come w/ a CPU purchase, and are
often tied to that system (the bios and motherboard info is embedded in
the CD setup info). They can be used with any HD type however, so if you
wanted to upgrade to a new, larger HD in your system it should work just
fine. Since your fiend had ME and told them he wanted to go to XP, Dell
should NOT have sold you one of these.
Assuming you got the former (for about $99, right?), then it's basically
just a normal XP Upgrade Disk, just like you'd buy at Target, except it
probably has dell's name on it somewhere. To do a clean install tell it
to delete all exisiting partitions, re-partition and then format the HD
(it'll warn about you losing all data, but you knew that). Later it'll
ask you to insert the "qualify product CD". Put in a Win9X or Win2K CD.
It MUST have an i386 folder in the root, otherwise it's not "qualifying".
[Most system restore disks don't have the i386 folder; virtually every
Win95 CD out there does, and it'll qualify just fine. someone you know
must have one of these coasters lying around somewhere.].