The symptoms you've mentioned keep pointing to something wrong with the hard drive. When you ran the Dell Diagnostics, did it run an advanced test on the hard drive? (it should have taken a little while to run). The way things have been going, it certainly does seem that the hard drive might be failing [hard drives making a rythmic clicking sound while not responding is often sign of drive failure].
Tell you what, let's get a second opinion, by running another diagnostic.
Since we don't know for sure what hard drive is in the system (the Toshiba XM-1802B - is the CD-ROM drive), let's try this: enter the Bios Setup screens, and see if this information is displayed under one of the menus (in some versions it isn't). If not, you can try using a bootable CD like the "Ultimate Boot CD" that I mentioned earlier - it has a detection tool (the old Astra utility should do the trick) that can detect the model of your drive. The "UBCD" also has several manufacturer's hard disk tools contained on it - one of which might be made specifically for yours. If your drive happens to be a Toshiba hard drive, for which there are no specialized manufacturer's diagnostics available for download (to my knowledge, anyway), we can try the IBM/Hitachi Drive Fitness Test, which can run generic tests on non-IBM/non-Hitachi drives (and if we are lucky, and your drive is an IBM, it can run more extensive tests on it). In the version of the UBCD I have here at the house, the IBM/Hitachi test is included on it.
Another option would be to try the Dell Diagnostics again -there may be a screen in the diagnostics that identifies the drive. You could also poke around and try an "extended" hard drive test, if one exists.
I'd expect to see an error. Most Inspiron 7000s have likely been retired from daily use by now. Owners like yourself, who have taken above-average care of their computers, and had a little luck on their sides too - can enjoy their laptops a few years longer than most. Sooner or later - the drive will wear out. When it does, I think it'd be best to retire the system (unless you have a free spare part to replace whatever fails). Laptop prices have dropped so much that it doesn't make economic sense to spend money to repair a P-II based laptop. As little as $450 can bring home a laptop several computing generations advanced from the P-II ($500 nowadays can even bring one home with a CD/DVD writer, 80gb+ hard drive, 15" display, memory card reader, wired & wireless ethernet networking, and more -- some dealers even throw in a printer).
But hopefully - that little message is for a future time! Let's see if your 7000 is still ready to go another lap or two around the calendar.
Since you have good backups, here's your new list
1) Run diagnostics - especially on the hard drive.
2) If the hard drive passes the "extended" hard drive tests, try a clean install of Windows with your Windows 98 system CD:
3) Boot the system with the CD.
4) Choose "Start Windows with CD-rom support"
5) From the command prompt, use the fdisk utility to delete the current DOS partitions (leave any "Non-DOS" partitions where they are - some Dells have Non-DOS restore/diagnositic partitions = you should not delete these unless you are sure you no longer need them).
6) Use the fdisk utility to create a Primary DOS partition, and mark it active. Say "Yes" to the "Enable Large Hard Disk Support?" prompt.
7) With the Windows CD still in the cd-drive, reboot from the CD, and let Windows 98 Setup start. It will offer to format the drive for you, let it (it will use it's native FAT32 file-system). Then just follow the prompts.
8) Before you reconnect to any networks, be sure to have an antivirus program installed and running, and have a firewall installed (and/or also be behind a hardware firewall, if possible). You'll need to visit Windows Update to catch up with a lot of Critical Updates - these will be available up to the point in mid-2006, when such patches were no longer created (the old ones are still available, though).
9) Scan your backups for malware before restoring the older data to your fresh installation.
10) Enjoy the computer you've worked so hard to repair.
And, I've mentioned it in other posts, but I'll mention it here also --- I keep an old 1997 Windows 98 2nd Edition laptop in good running condition here at the house (it came with the original Windows 98) - it's powered by a 233mhz Pentium, and only has 64mb (the max) of memory: but my littlest nieces and nephews enjoy it just as if it were a Core Duo, when Pooh Bear tells them a story on it
Hope the drive turns out OK after all (or you round up a free/inexpensive replacement) & you can enjoy it again
. . . Gary