I'm pretty sure it was a botched update that's caused this, but the error could also point to a problem with the hard drive.
Let's run a Repair installation using the Dell disk. Doing this will appear like it's doing a fresh install and you will be warned that you may lose the files in your Documents folder. I've never seen it cause damage to the files, however. This looks more complicated than it is and will take about an hour in most cases. Just follow the instructions in the Guide I link you to carefully and you'll do fine. If you are asked for a product key during the install, it should be located on a sticker on the lower left corner of the left side panel of a Dell desktop or the bottom of a laptop. It's a 25 character alpha-numeric code xxxxx-xxxxx-xxxxx-xxxxx-xxxxx. Dells do sometimes ask for this code, but not always.
This will effectively remove all the Windows Updates and replace the system core files. Your data should be just fine.
Windows XP Repair InstallationI'll stay online until we see how you fare with this.