"So do you think my drive access time really is too slow and that the spin up speed issue refers to CD and DVD and is likely to fix it? "

Unfortunately Dell isn't too descriptive in what they mean by "Fixed a problem with drive spin-up detection."  One would assume that it is meant for all the drives connected in the system versus just supporting the hard drive(s).  From viewing the BIOS histories for other Dell models, they are pretty good about noting changes effecting just hard drives themselves.  The best you can do is give the BIOS upgrade a try and see what happens from there.

I also wasn't sure that hibernation was related to the S3 issue. But you think it is?"

Again, the only way to rule out the BIOS as being the source of the problem is to try an upgrade.  I can't guarantee that a BIOS upgrade will cure your problems 100%, but upgrading the BIOS is the first step in trouble-shooting the problem.  Especially since there are upgrades being offered that have known fixes in them.

"I've never upgraded a BIOS before and so I am a little hesitant since I know it's not foolproof, but I'm backed up and have the old BIOS A01 on floppy, so I guess I should just go do it."

If you have taken all the precautions and don't interrupt the BIOS upgrade or do the upgrade when conditions might indicate a possible power outage such as doing the upgrade during a thunderstorm then you have taken all possible precautions.  If the BIOS upgrade is going to fail then it's out of your hands and nothing you do can prevent it.  Sometimes a bad BIOS flash can just happen for no reason.  That is why it is a good idea to keep the BIOS versions current while the system is still under warranty.  If you encounter problems then post back with an update. 

"Sorry to say DVD spinup is still very slow. I didn't time it, but it was "many" seconds. I've Googled this and have read that it's common, but not necessarily going to happen to all drives. Guess I got a slow model.

It seemed like CD spinup was faster, but I was late and had to leave."

You might want check to see that the CD drives are operating at the correct DMA mode and are not in the PIO mode.  I recall past discussions in the Dimension - DVD/CD Device forum about drives operating at the slower transfer rate.  That I imagine would have an effect on how long it takes to search and display information in Windows Explorer.