Help! Flashing cursor of doom!

I'm not sure if the problem is hardware or software, so I've posted here.
Mod, please move to the appropriate place...

So about 3 months ago, I shell out the cash for a Dell XPS 600. Get the computer and on the very first powerup, the thing hangs during boot with a flashing cursor on the upper left of the screen. I brush it off, restart eveyrthing and all is well and good.

Unfortunately, this problem is getting worse. Sometimes it takes 10+ restarts (still getting stuck on the flashing cursor) until it can properly boot up. Sometimes it's great. I've contacted Dell support several times over these past few months and they seem worthless. I've set the USB emulation to no boot (which they claimed would "definitely resolve the issue"), but no dice. (first 3 diagnostic lights are lit if that means anything to anyone).

I've also gotten the occasional BSOD for IRQL not less than or equal and previous attempts at booting have failed @ checkpoint Ithr, but the biggest problem by far is the boot one.

The last thing that support wanted me to do was reformat the HD because they believe that the OS is corrupted (WinXP). I really don't want to do this for two reasons (1) It's a pain in the ass getting everything back to normal on a newly wiped system and (2) they're probably wrong.

Anyone have any advice? Is there someone beyond dell support I should be complaining to? There should be a lemon law on these things...