A word of advice here - stay away from Partition Magic 7.0 (for XP). I tried to format my third hard drive (slaved on secondary controller) with PM and when I rebooted, PM hosed my C: (primary, OS) drive. Talk about f*cking up a Sunday! This was the third and last time PM screwed me, the other two were not as catastrophic.
Use the XP boot CD for formatting. But yes, Ghost restores the file system with the image. Lastly, Drive Image 5.0 wouldn't run after the reboot to DR-DOS. Ghost is still king.
LJ
EDIT - also, when I reinstalled XP, I had to call Microsoft as my number of installs was up!