|Don't ask why... but in M$-land for the NT/W2K/XP family the system drive is where the actual boot/start-up files reside; the boot drive is where the actual system files (the OS itself) reside...|
In a single partitioned drive the two are actually one and the same; in a dual partition drive (Primary and Extended - and the OS in a logical-drive in the Extended area) they are obviously separate. In a dual/multi-primary drive one of them may be the system partition and the other(s) a boot partition - even though the latter could equally be a system partition...
All beautifully konphusing isn't it and seemingly so typical of M$-land developers?
Asking the OS to reformat either partition when it's booting via the system partition into the boot partition is asking it to commit suicide...; and equally so when the two are one and the same... Naturally it will be very unwilling to to so do.
As already pointed out by others above; when you installed to d: the boot/startup files would still be in c: ; the boot-menu on c: merely points to the second installation on the d: drive. This is how it will be unless you made d: a Primary and set it as the "active" Primray; it then would contain the boot-files for the installation on d: . And you "could then reformat c: - as it would not be asking the installation on d: to commit suicide by erasing files it needed to boot...
If you wish to reformat a partition with an installation in it - and you are booted into and using that installation then you can't. You can only reformat a partition with an OS in it either from another installation - that does NOT use/require "any" of the information that is in the partition to be reformatted; or via a boot from a suitable cd or bootdisk...
And this latter bit I think now you have discovered and understand?
You say you have the Dell recovery disks? I'd have been inclined to use those as per Dell's how to use them info - on their web-site and presumably with the system when you got it?
Some of those recovery disk routines allow: a repair without loss of data; a repair that does lose data - which in effect restores system to as delivered...? One has to check carefully what the options are and which/how to use?
At this stage (using the working installation on d: )I'd be much inclined to save all files/data etc. to optical media; verify they are truly readable etc. on another system (if possible) too. Then set about recovering a working OS on c: - and once achieved either retain or get rid of that on d: . To recover a working OS on c: - ether use the Dell disks and restore delivery status; or use a full version CD and reformat/re-install afresh to c: . Then again you can either retain d: version or delete it? If you retain the d: installation after re-building the c: installation (whichever way) you will have a dual-boot XP/XP system (which in effect you already have - even though c: installation isn't all that great).
Once you have a working system, make an image of it; keep safe - for future use?