I've tried a total of three XP Pro CDs in this debacle. The original received with the machine; another Dell XP Pro CD of a later vintage (Svc Pack 3); and a full (non-OEM) version from Microsoft (Svc Pack 2). All 3 failed to install because of not finding nvrd32.sys; and, yes, the driver does not appear to be needed by the Dell D600. But, guess what - after the first reinstall failure, I found the file right off the bat stored away in the Windows\dell\ subdirectory of the laptop's system drive.
None of this adds up for me - but then, if it did, I probably would not have brought the matter to the forum. Maybe someone out there will have a lead on a fix. I don't have a bootable DOS O/S disk, but if I did, I'd give your idea a whirl, since at this point, I'm ready to attempt to follow thru on any reasonable suggestion.