Before sending it back, I thought I would give it one last shot and purchased a 1GB USB key from a local computer dealer. Then downloaded a ubuntu ISO for a CD install. After a few trial and errors and searching on the internet, I think I have the actual instructions to get it working. Although, I am no linux kernel hacker, here goes:
1. Download the ISO that you want (in my case ubuntu 6.06 desktop)
2. Download the syslinux tool for windows (syslinux latest)
3. Optional USB format utility (from HP)
4. Copy the CD contents to your USB device
5. Unzip the syslinux and run it against your USB drive (syslinux.exe -f F:) from the win32 directory of syslinux
6. Copy these files to the root of the USB
vmlinuz (kernel binary) from "casper\vmlinuz"
initrd.gz (initial ramdisk image) from "casper\initrd.gz"
syslinux.cfg (SYSLINUX configuration file) rename and copy from "isolinux\isolinux.cfg"
7. Then edit the syslinux.cfg so that the vmlinux and initrd.gz now point to the root
e.g.
DEFAULT /casper/vmlinuz
GFXBOOT bootlogo
GFXBOOT-BACKGROUND 0xB6875A
APPEND boot=casper initrd=/casper/initrd.gz ramdisk_size=1048576 root=/dev/ram
rw quiet splash --
....Becomes....
DEFAULT vmlinuz
GFXBOOT bootlogo
GFXBOOT-BACKGROUND 0xB6875A
APPEND boot=casper initrd=initrd.gz ramdisk_size=1048576 root=/dev/ram
rw quiet splash --
8. Eject the USB and you can now boot from it as soon as you go into the BIOS settings on the DELL server (F2 at boot) and set the boot order to allow the USB device to boot as a priority