I have the opportunity to purchase some Dell Restore CD's w/XP Home on
them. They were obtained from a supplier who received numerous Dell
PC's after a company replaced their systems. I want to know if these
CD's can be legally used on PC clones that I build? Since Dell
includes the COA as I understand it on the CD what do I do about that?

It's unclear to me from the details if this would be a legitimate
transfer of the licenses.  But, let me give you a list of reasons why
this is probably not a good idea.

The OEM license for these copies of XP were sold to Dell to be sold to
consumers with their hardware.  Depending on how far Dell goes with
their OEM rights, you may not be able to install this software on a
non-Dell system.  OEMs have the right to BIOS-lock the version of XP
so that it can only be used on their systems.

If these licenses have been activated by the previous owners, you will
have to call Microsoft and convince them to give you a new activation
code for each installation.  Since the activation code is based on the
hardware in the system, you will have to do this for every system.

Since these are coming from what I assume are running machines, the
license is still technically in use on those systems.  If the person
with all of these Dell systems sells them (or uses them), the license
and CD need to go with the system.

OEM versions are not supported by Microsoft.  If you sell this OEM
copy to a customer and they call Microsoft for support, Microsoft will
tell them to call Dell for support and the customer will be very
confused.

A nice discussion of these and other problems with OEM copies can be found here:

http://www.tek-tips.com/gfaqs.cfm/pid/779/fid/4004

Search strategy

I found the above article by searching for 'xp oem license transfer'.

://www.google.com/search?q=xp+oem+license+transfer

I hope this helps you decide on the right course of action,
Weaver