Since it sounds like you made backups of all your important data, you can start by patting yourself on the back :) Too many people live to regret skipping this important step.
It sounds like you have a new hard drive and all the necessary software discs (windows XP disc, copies of all the necessary software, etc.). Good.
First, I'd be hesitant to 'clone' the contents of the bad drive onto a new drive. Even if you got lucky enough to actually do it, you'd still be in a bad place since the old drive either has a corrupt system file or it's physically damaged. In either case, I doubt you'd end up with a bootable drive when you were done.
I had another thought: Since this sounds like a corporate installation, it might be worth your while to plunk down 80 bucks on a program called "Spinrite". This thing is AWESOME. In a nutshell, it takes non-bootable drives and "magically" makes them bootable. I don't generally recommend it for home use, since it costs more than a new 2TB hard drive, but in your case, it might be worth it.
http://www.grc.com/spinrite.htm
Barring that, a clean install on a new drive should pose no problem. Pop the new drive into the dell, pop the WinXP disc into the CD drive, and you're off. Once windows is installed, re-install whatever applications you need, restore your data from those backups you have, and you're golden.
Good luck.