I have tried all options I could find for formatting the hard drive in my Dell Inspiron 8600 but nothing works. I tried format c: from the command prompt but I get a message saying that "the volume is in use by another process" but when I tried the option to "force dismount on drive" it says volume still in use. Any ideas? Thanks.

You cannot format the boot (C:) drive while windows is running.
This must be done from boot.

Why are you attempting to format it anyway ?

A lot of crap has built up from different people using the machine, and I would like a fresh start. I tried booting from the oriiginal XP disk but I get a message saying that the current XP on the machine is newer than the one I want to boot from and it won't let me do it. I tried ctrl/f11 during boot up, which is an acceptable command for some machines, but apparently not mine. Can you suggest anything else? Thank you.

You want to do a clean install of Windows. Here are some links for instructions:

XP Clean Install

Clean Install Windows XP

How to install or upgrade to Windows XP

Basically, you want to blow away the entire partition, then recreate it and install Windows on it. There won't be anything left when you're finished, so be sure you are ready for that (that means back up everything you want). Remember that you'll have to reinstall all drivers for your peripherals and all programs that you want.