Your choice of NTFS vs FAT32 depends on if you think you will need to write to your XP partition from OS X. Personally, I use NTFS and use a USB stick to transfer files... Also, if your XP partition is larger than 32 Gb XP won't allow you to format it FAT32.
No, a Dell OEM copy of XP will not only not work on your Mac it's a violation of the EULA in which the license of XP is inextricably tied to the Dell it came with.