Thanks to Partha, Timster and Double clutch
I have now sorted out the problem.
This is what I did;
1. Checked that I could use F2 to get into the BIOS and checked that the HDD was set to priority.
2. On restart I checked that F12 also worked and it did but there was no Dell Diagnostic.
3. Tried F8 to get into Safe Mode but it did not load.
4. Inserted the Windows 7 installation DVD into the PC’s CD-ROM drive.
5. Powered down the pc.
6. Powered up the PC pressed any key when I saw “Press any key to boot from CD or DVD.”
7. Clicked the link titled “Repair your computer”.
8. Waited for Startup Repair to scan the PC for Windows installation.
9. Chose “Command Prompt” from the list of available.
10. Entered chkdsk C: /f to start System File Checker
11. When the System File Checker completed and pc restarted I again pressed F12 to boot from Windows installation disc and did a memory test no errors reported.
12. Removed the Windows installation DVD from the CD-ROM and restarted the pc to boot from the HDD.
13. Windows update installed 11 updates “.
14. After Windows restarted it said something like “Updating update operations (a serious of numbers) (Registry\Machi…) Configuring Windows.
15. Windows restarted automatically.
16. Powered off manually.
17. Powered up pc Windows booted from HDD.
18. Went to Dell Support and ran Online 10 min Diagnostic only error reported optical drive tray failed to open.
19. Pc can now boot from the HDD without going into a loop.
20. Problem solved, for now!