Do you have a USB stick plugged in? Or a USB drive? Detatch all your USB drives, then reboot.
In your BIOS, you can fix this by changing the boot order, and put your IDE/SATA (internal HD) higher up in the list.
If the above advice doesn't help, you could have disabled the internal HD via BIOS (set from AutoDetect to none perhaps, in the IDE controller section), or the hard drive died on you (unlikely, but possible).
Update 1: Interesting. Do you have a CD in the drive? Although that's pushing it, as it should bypass a non-bootable CD in the drive and go to the next device in the list.
Update 2: The only other thing I can think is happening is that during the time the computer froze, it was updating/modifying some required system files. The system was reset forceably, and that can cause corruption (not permanent damage, but it prevents it from booting up). The diagnostic comes up ok because the drive itself is fine.
If you can put the Vista disc in, and boot from that, try repairing the system and see if that will work. You'll need to set the CD first in the boot order for it to work.
Check out this link for step by step instructions:
http://vistabusiness.windowsreinstall.com/repairstartup/repairstartup.htm
Update 3:
Try changing the hard drive mode (SATA controller settings in the BIOS) from AHCI to Compatibility Mode (or now that I think about it, you probably set it to compatibilty when resetting everything... set it to AHCI for Vista. Either way, change it from what it's set to, to the other option). After making that change, then try to boot normally, or if that fails, leave it in the new mode and try the Vista reinstall/fix.
Update 4: it's hard to find info on the BIOS settings for that laptop.. from what I can gather, SATA 1 just enables the primary SATA port (hard drive) and SATA 1/2 enables both ports (Hard drive and DVD drive typically).
Please go to the boot order page and write down every entry you see, and type it here if you don't mind...
Update 5: Not a problem. This is a tough one to solve though... You mentioned disabled. What devices are disabled? Does it list any?
Update 6: Does the disabled option expand? Any hard drives (or SATA devices) listed under that option that you can move up?
Update 7: I think I've exhausted all options I can think of (you menioned that your husband checked the cables going from the drive to the motherboard. Both of them are plugged in, right (the power and the data (SATA) line? It is SATA right (typically a thinish (half an inch wide) cable)? or am I just assuming?)...
At this point, I would call Dell and troubleshoot the issue with them (hopefully it's under warranty).
In my opinion, the problem is either the hard drive, the cable, or the motherboard. Replace the cable first (any SATA cable will do) and see if that makes a difference. Then the hard drive and finally the motherboard (or system if it's old as the cost might involve a mandatory CPU and/or memory replacement along with the new motherboard).