Dell OEM CDs

IMHO OEM is not upgradeable.
However you may be able to get a downgrade XP from Dell, give them a call.
We do that with HP vista computers all the time.

OEM's are specific to your system. This is due to each system having it's own product key. So if you have a valid Windows 7 OEM for your system there isn't an issue. And it is very possible to downgrade with the same caveats. I've known people that after sometimes much trial and tribulation were able to convice Dell for the downgrade disks. (Vista to XP). It wasn't easy. But they did do it.
If you're willing to spend some time and energy here's the POC options for Dell (chat and voice).
http://support.dell.com/support/topics/global.aspx/support/dellcare/contact_us?c=us&l=en&s=biz

I have both an XP OEM CD and Windows 7 OEM CD. I will go ahead and downgrade to XP if it is legal. I can format my Dell and reinstall it with Windows 7 correct? I'm sure doing it that way will work but is it legal?

Thanks

I just talked to a Dell tech and he said it is legal for me to format my Dell and reinstall it with a Dell Windows 7 OEM CD. Does this sound correct?

Installing an OEM version of Windows 7 onto a computer that did not come with it is almost certainly not covered under the software agreement. Specifically, the activation key that came with the laptop you purchased with only work with that OEM Windows Vista install disk that you recieved (or perhaps with the disks that were shipped with other laptops like yours that are the same model). If you are interested in installing either Windows XP or Windows 7, you would need to purchase a seperate license (and corresponding shrinkwrap) for those different versions of Windows.
Long story short: the Dell OEM XP and 7 disks you have are very likely only valid for the orginal systems for which they were purchased.

You can do it but it isn't legal - with some specific exceptions.

DOWNGRADES
You bought Windows Vista or 7 with an explicit downgrade to XP option.
In which case you may only install the version you elected to have - depending on what you bought this might be what the guy at Dell was describing to you
OR

UPGRADES
You bought Vista while Windows 7 was in release so you are entitled through Dell to upgrade to Windows 7
as part of their upgrade programme.  You would have been supplied with a revised CoA sticker for the upgrade version.

With OEM installs the general rule that applies is that the version on the CoA is the only version that you are legally entitled to use.

in terms of your Downgrade questions, you may have difficulties finding XP drivers for a laptop shipped with Vista.  Check the Dell support site for availability.  Just a heads up...

I was just told by another Dell tech that it is perfectly fine to use a Dell Vista or Windows 7 OEM disk to upgrade an older OS on a Dell system. When I say upgrade, I mean format the machine and reinstall the OS. So according to two Dell techs, I can legally do this.

Physically possible yes, legal?  Well, if the guy from Dell says so ...
I'd ask them to direct you to a webpage either of their own or Microsoft's site that supports this, or at least as a Dell representative put this in an email for you - tell them you just need this to CYA.
I'm going to lose a substantial wager if they do this :)

Downgrading is a different matter - if you have OEM Vista or Windows 7 with an explict downgrade right

I believe you are correct with your answer. I will go ahead and accept yours as a solution even though Dell says it is legal

Since this is set to close, can you mark your last response as correct.

Thanks