If by factory restore you mean restoring the Dell back-up image, the restore will replace everything on the drive with the original software delivered by Dell.  Any data that you have stored on the computer should be backed up before you perform the procedure if you wish to keep it.

Where is the back up image and how do I go about doing the restore my computer back to how it was as new?

Your computer's manual tells you how. It is different between the XP and Vista machines.

Or go to dell.com and read how on there.

No, it takes it back to where you open the brand new box.  It tells you how to perform this reset. 

Here is the link you need to do this.  http://support.dell.com/support/topics/global.aspx/support/dsn/en/document?c=us&docid=58E26A65A4388E4FE040AE0AB7E107E3&l=en&s=gen#man_osri_task1

Restoring your [Dell] computer to the factory settings :emotion-5:

As advised, it wipes your hard drive in the process, so make sure you backup anything important to you first :emotion-55:

Hi Alohavik, You did not say what, and if, you had an problem. However, have you tried doing an windows restore by taking your system back to an time before you had the problem. This will save you time by reinstalling your OP.