To back up, best to take the hard drive out and piggyback it onto another machine and then copy across what you need
To restore it, use the hidden recovery image. That way you get back to an out-of-the-box state that should simply just work. If you use a normal windows CD then you are going to have to mess about getting drivers (possibly suboptimal ones)
And if it is under warranty, Del will expect it to be restored using the factory image, just to prove the case
here's Dell's howto
Windows 7 PC Restore | Dell UK