The Dell xp cd is an oem branded disc - a generic oem will also work fine, but that is strictly for the license key on the machine so it will activate properly. A Retail based disc OR corporate edition (volume license) will not take your existing key, so you'd better have one of those key types handy if you're going to use it.
You cannot change the drive controller type without having the proper drivers installed in the OS - so if it was RAID/IDE leave it that way. If you want to set AHCI you will then need to reformat so the drivers are installed.
A BSOD at boot like that is usually a corrupt file on the drive. If you can get to a command console (boot from the OS disc, then press R at the first screen) you can run "chkdsk /p" with no quotes to check the drive for errors. changing /p to /r will also check for bad sectors and will take a LONG time to finish, but may prove worthwhile if your drive is failing.
If you have another pc, you can take the drive out of it and connect it there NOT AS A BOOT DRIVE but as a second drive. Then you can use check disk within the other PC's windows to check it for errors - sometimes works quite well as a fix.
Also, BSOD's can be figured out by looking for the mini dump file that the blue screen leaves. Those files are located at C:\windows\minidump and you will need WinDbg to analyze them (or someone who can read a crash dump file). that will help pinpoint the critter that is giving you problems.
As always, I hope you have a backup before you go trying reformats unless you don't need data off of that drive. Good luck!