You say "a photo CD" - is that a special format, or just a simple CD with jpg files?
If you used a program (rather than just copied the files) to burn the CD, perhaps you simply don't have the correct program to read them on the XP system. Other than that, there's no technical reason that the CD should be unreadable in XP.
Re putting XP on the system - there is one major issue - does the system have a set of drivers for use with XP - some newer systems don't have. Also you may care to ask Dell if there is a "downgrade" option for your system - some Dell systems have that, I understand.