Not sure if I'm misunderstanding your question, but yes, you can reformat as part of a Vista upgrade if you start the process from within XP. I didn't have to follow the "double-install" procedure. Someone please correct me if I'm wrong, but the "double-install" is useful if you want to put Vista on a totally new/clean hard drive. I was upgrading an XP machine, so I popped the Vista upgrade DVD in, answered a couple of questions, and chose a "clean" install where my drive was wiped clean and Vista installed fresh as part of the upgrade. As an added benefit, the old XP files are placed in a Windows.old directory just in case you forgot to back anything up. You could just delete that directory or you can, for example, locate and restore all of your Outlook Express emails that you totally forgot to backup before the upgrade. =)
Anyway, just wanted to clarify because I think there's some confusion about "clean" install. I know I was confused. My Vista upgrade DVD allowed for a "fresh" Vista install with no problems as long as I started it from within my old XP instance. The "double-install" procedure only appears necessary on a totally new hard drive.
Hopefully this helps!