I am posting this for benefit of anyone else who has same problem, as I could not find an answer anywhere on web searches that matched my exact problem.
The hard drive (*** 640MB) failed on my Inspiron 15R (N5010). (Disappointing after only 5 years just sitting on my desk). Anyway, found instructions on net to replace hard drive. Bought a 1TB drive and installed. (Would be nice if DELL had easy access to replace hard drive). Reinstalled Windows by booting to the original DELL Datasafe Bacxkup Recovery disks for factory restore that I created when I originally bought my DELL. This all worked fine (Thankyou DELL). Downloaded and installed Windows 7 SP1, and then all Windows 7 Updates (over 200 since SP1)! (Note I did have a Windows System Image Recovery Backup, but as I did this after disk failure started, it may have been corrupt, which is why I decided to rebuild from factory restore recovery disks).
Then I looked at Disk Management and found I only had a very small logical D: drive (2MB) I think.
I deleted this, thinking I would simply be able to create a new D: drive in the 800 odd GB I had spare on my 1TB drive. But Disk Management said could not create New Simple Volume, as maximum number of partitions already existed. After much research and reading, I used the Windows DISKPART utility. By select DISK 0, and LIST PARTITION, I found there was still the Extended Partition of about 2MB following the C: partition. This had a Partition number of 0. (This does not show up at all in Disk Management)! So in DISKPART, I did SELECT PARTITION 0, then DELETE PARTITION. I was then able to go back into Disk Management and right click on Unallocated space to right of C: partition and create D: Drive to use rest of my 1TB hard drive.
As another observation, after using the DELL Recovery Disks to recover onto a larger hard drive, there is 5.55GB of Unallocated space after the initial OEM partition, and before the Recovery and C: Partitions. I suspect this happens with the DELL recovery, because it was onto a 1TB drive and not a 640GB drive. I'm just leaving this as is.