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Apparently this is a wide spread problem considering most of us do fresh installs once we receive our laptops. Anyways, seems like dell with this model (not sure about the rest of the vostro/inspiron line) you must reinstall the drivers in a particular order.

I spoke with a Dell Tech today and he gave me the run through so I will post it on here for the people that might run into this problem.

Here is the exact order you should be installing the drivers:

Dell Notebook System Software (NSS)
Chipset
Video
Media Card Reader
Network Controller
Wireless Card
Audio
MDC
Bluetooth (if equipped)
Touchpad
QuickSet Utility
Drivers for other peripherals connected

That is exactly what he had posted. He is also sending me 4 cds (which did not come in the box) mediadirect, powerdvd, webcam center software, burning software to me tomorrow.

I hope this helps anyone that is about to do a fresh install. I always do this with my laptops and desktops and never had a problem which order I did the drivers in.

If you did it right your webcam should be working. By the way the webcam driver/app should be the last step (Drivers for other peripherals connected)