Need help with restoring Dell Inspiron E1505

Hello,

I'm trying to restore my Dell Inspiron E1505 to the factory settings. I backed up all my documents, pictures, and music to a Seagate FreeAgent Go so I'm ready to go in that area. I've tried multiple times to restore my computer to the original factory settings by going through startup menu after pressing F8.
I am able to get as far as pressing the button to complete the process but it says the factory image cannot be found, basically that it's vanished, and that I need to use the CD. I've tried to reinstall from the CD but I did not have enough space available. I just finished deleting the music off my computer so I have enough space, currently trying reinstall again.
I've tried to find the answer by reading through forums but haven't found anything helpful so far. Am I recovering the factory image correctly? What do I need to do in order to recover the image from the disc and complete the factory restore? Detailed information would be appreciated.

Thanks,

Josh