The DBP,
Well, you've gotten further than I have. I have the exact same computer and I have a 3.0GHz P4 w/HT, As you've already seen from my first post, but the first time I tried installing Windows 7, it installed fine, but on the first reboot, It went to CMOS and said no hard drives were installed and I couldn't enable them. So I took out the hard drive with Windows 7 on it and put my Windows-XP drive back in and was fine. Then I waited for several months and tried again and this time, I got as far as installing Windows 7 and it was working fine. Then I did the first set of updates, and it rebooted and I got the message from CMOS that there weren't any hard drives installed, so I put my Windows-XP drive back in and am still using that. It wasn't worth the hassle of trying to get it to work with Windows 7.
A new Motherboard, Power Supply, but not from Dell, but one that had the same Form Factor, as long as the connections from the power swith and LED's matches up and the connections from the front USB/Headphone jack match up, you would be in better shape and it technically wouldn't be a Dell Computer anymore, but whatever brand of Motherboard and CPU you had and therefore wouldn't have the problems that DELL has. Also, with a new Motherboard, you could go well beyond the Max 2GB memory that is limited by Dell. Then too, you could take advantage of PCI-e cards instead of PCI cards and not have all the hassles I went through trying to get Windows 7 to work on my Dimension 3000.
I ended up getting an HP/Compaq Presario Notebook that came with Vista but I installed Windows 7 on it and it has a built in Number Keypad and Wi-Fi, and a much faster CPU so I use this now and just use the Dell Dimension 3000 for other things like backing up my Vinyl Record collection and transferring VHS Tapes to DVD.
I really don't think the 3.2GHz CPU will make a difference being I had a 3.0 one. And Dell's website says that it will only work on 2 older model desktops and unfortunately the Dimension 3000 isn't one of them.
I wish you the best in getting it to work, but in my opinion, it would be easier to try and get a new motherboard, power supply and CPU.
Susan