Ok, lemme make sure I'm following you...
1) You boot into recovery you and once there, you choose option 2, which is to install the update.pkg
2) That takes you to ANOTHER screen with blue writing on a black background (not sure exactly what it says because I only see it for a few seconds when I flash stock recoveries)
3) The purpose of that screen is to verify that you want to continue with the installation of the update.pkg
Sooooo, if the Streak is not going to that second screen then you have something wrong with your recovery.img, which means something is going wrong when you flash the stock recovery.img in fastboot.
IF you get to the verification screen, and you choose to continue, stock recovery will verify the contents of the update.pkg and write the files, if something goes wrong, it WILL NOT get past the writing of files and give you an error message.
If no errors occur, it WILL get to another screen where you will see a white box with an arrow, or an ANdroid standing next to the box, of a shot of a Dell Streak laying LCD down (all these depending on which update.pkg you flashed)... now this is the installation part of the ROM flash... IF no error messages come up here then your phone will reboot, the DELL logo will show up for a few seconds, and the phone will flash AGAIN notifying you it is doing an automatic factory recovery.
NOW, you need to tell me where in all that process you have a hiccup