You more and likely will have to call dell then. This should have let you boot your recovery disk.
Before I do, I do this I got a Genuine Disk from my friend that's Windows 7 with SP1 and I just get stuck at "Setup is Starting". Have this happen to you? Or can you tell me what's to do next?
I have never had that happen. But just at a wild guess. Your hard drive has the frist part of set up files, From your os. From dell. Unless you can format the hard drive. I doubt the win 7 disk .Will work. Even if it did I doubt it would activate. The key belongs to his or her Computer. I have a feeling you corrupted the recovery partion when you shut it down. If you could boot into the recovery section again .You might be able to run a system repair on your files. But as you stated it will not let you. So my best advice is call dell. Or wait and see if someone here knows a way.
It's probably a problem or even multiple problems with the hard drive. It may have been on the way out or infected with a virus but that's just speculation. As Cobalt006 says the recovery partition may also be corrupted from when you shut the laptop down. Good luck with Dell. It's unlikely that you're going to get a solution without professional assistance.