Hi...finishing up at work and killing time so I figured you may want to know about the (eventual) happy ending to this story.

I finally fixed this issue about 3 weeks ago. Backed up, reformat and I did a re-install attempt, got some evil BSOD's and finally found this...

http://forums.majorgeeks.com/showthread.php?t=150594

Dell sent XPS 600 buyers an XP CD that doesn't have the correct SATA driver on it. I called Dell, gave some BS about losing the CD and had a new one sent to me. Came next day and was thankfully sent for free.

Anyway - the replacement XP CD worked and sound issue has been fixed.