Thank you everyone for your advice. I think there may be something wrong with the hardware that Windows doesn't like.
When I try to install Windows 7 is always goes to my original problem. This is with the original factory disk, one burned from the Dell website and one loaded to a USB drive from here:
Clean Reinstall - Factory OEM Windows 7
I installed the 3rd version onto a USB drive on another Windows 7 PC as advised here:
Windows 7 USB/DVD Download Tool[2]=General%20Tips
I can never get to Option Two, part three, as shown here:
System Recovery Options
It just goes straight through with the install until it gets to the error I originally posted about.
What is very odd is that the only input that is accepted from the keyboard is ENTER when I try to install Windows 7.
So I tried installing WinXP. That wouldn't even let me use the ENTER key. F3 to exit works fine though.
To toss even more mystery into this mayhem I thought I would try linux. I was able to install Linux Mint just fine and everything works. Even the keyboard!
ARG!