It turns out this has someting to do with the RAID setting in the BIOS (F2 at startup).
- F2 at startup
- SATA Operation
in this option it is set at RAID: On
the only other option is RAID: Autodetect / ATA
set it to RAID: Autodetect / ATA and save and exit now restart with the XP CD in the drive and boot from CD.
everything should run smooth and normal now. it worked first shot for me and I haven't had a problem. the Dimension E520 is a decent machine with XP on it. does everything it needs to do for my GF who is an occasional Comp user. it was a paper weight with Vista on it
hope this helps crappy dell users out there.
(This worked for DELL computers (PC's) I have encountered. I have no idea if this will work on any other machine)