Dell replaced our 2 year old Dell Inspiron with a refiurbished Dell Inspiron E1705 with Vista  I want to install my current Version DNS 8.1 so I do not have to spend the $149 to update.

Is it possible, what do I lose, and will it damage the system?  If I can what files do I need to transfer from the old Dell to the new one before I ship it off?

There is no way to install Preferred 8 on Vista. You can’t even install Preferred 9 on Vista. Only version 9.5 is Vista compatible so the only way you're going to be able to install DNS on your new Dell Computer is to upgrade but we believe it's well worth it for a number of reasons.

The 1st thing you want to do is avoid purchasing software directly from the manufacturer because you're going to pay retail and you're not going to receive any extra technical support. You can save $40 by purchasing Preferred 9.5 from the folks who are assisting you today and you will not only received the usual Nuance Technical Support (because we are licensed Nuance vendors) but you will also receive an additional layer of virtual on-site Technical Support; not to mention a copy of our KnowBrainer Upgrade/Training Guide

Under no circumstances should you upgrade an old user profile but you can preserve your previous vocabulary and commands. You'll find a step-by-step on this process in our training guide.

Click KB 2012 REV D to Download a 30 Day Evaluation of KnowBrainer 2012 

Despite reports to the contrary, I was actually able to get NS 8 to install on Vista (Japanese version; I don't know if that makes a difference). I felt very optimist as the program started and user training began, but NS could not recognize any sound from the computer. Perhaps with some tweaking it might have eventually worked, but it was a friend's computer and I didn't want to devote too much time to the test effort.

NS setup ran and installed normally, and never complained about Vista. If you can't even get to that point, then you'll probably have to take Lunis's advice and get 9.5. Or, you could petition Dell to give you a copy of XP, claiming that Vista is incompatible with your software requirements.

Good luck!