What if you take a WindowsXP install CD and let it get to the point of displaying partitions. How many do you see? Can you delete them?
Under your Distribute Disk Image Advanced options, are you sent to 100% or a fixed size?
Look under additional options and see if you have the delete options set for both Partitions listed.
Last but not least, or maybe it should be first, what gets me with Dell PC's on a regular basis is an old version of BIOS. As a matter of practice, this is the first thing I do to a PC before I try to image it.