|You said you contacted Dell and they were of no use. What did they tell you it would take? Also, did you give them the service tag number to see if it was reported as stolen?|
See, my thinking is this. If the pawn shop thought they were buying from the legal owner they would get any passwords needed. The laptop is worth more if the OS and drive are usable.
One other thing to mention. Some drivers for WinXP may not be available.
Googling for that model shows companies selling that model refurbished for $420/450. Model came with Vista pre-installed on a 160GB hard drive.
I still recommend returning it.