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What Dell told you is correct.
The reason BIS doesn't include the OS in the "In Use" figure is because the OS isn't in BIS. The OS is in the ROM and BIS is what's left over after the OS is installed, and is what you get to install your stuff into.
As for that 1.23 In Use.......

Have you put anything in there? A BackUp, maybe? Do you have "Show All Files" enabled? What Explorer app are you using to look at your BIS?