The motherboard should support a i7-960. At one time it was an option to order on Dell's site. Reference the below article:http://www.desktopreview.com/default.asp?newsID=1170
Customers looking for a bit more power can certainly find it; the quad-core Core i7-960 will run an additional $470 and the six-core Core i7-980X upgrade is a cool grand.
They are probably unable to reference the correct documentation and trying to sell you a new computer. I have upgraded CPUs in a number of Dell XPS machines without a problem, staying in the same processor family. Dell is rather good (historically) at providing BIOS compatibility for CPUs.
Supported procs for the motherboard are at least:
◦Intel Core i7-930
◦Intel Core i7-960
◦Intel Core i7-990X