after years and years of reformats and trying to save stuff i thought i still needed... its just a PITA to sort hundreds of gigs of stuff everytime you format.
so i look at all the harddrives i have. currently, it seems that i have extra 120gb drives, not to mention they are very cheap anyway... so i will always have them around.
then, i take my multiple terabyte drive, part off 100GB, and use the rest as storage. first, the 100GB partition will easily fit onto any 120GB drive (easy cloning backup!), and its also plenty big enough for an os drive. all my games, movies, whatever gets stored onto the storage partition. putting steam games onto the storage partition is a LIFE SAVER when it comes for reformatting (no reinstalls. no lost games. it just works).
also, use the default folders in windows! everything basically gets saved in "my documents". all downloads, pics... all that stuff youll want to save gets stored underneath the my documents folder. this makes backing up really fast.
just copy that folder to your storage partition, and thats it. wipe that sucker clean. reinstall the os, and copy the my documents (which includes all its subfolders) back to your os partition. done. you have your personal files back, and everything else was saved to your storage partition.
the only part that sort of sucks is when you go to install some programs that dont really like to be on something other then the system root drive... so thats why i save the os partition for programs only, and my games get installed to the storage partition.
been doing it this way for years now, and i think most others do about the same. only other thing i want to add is, use partition cloning! too many programs these days require online activation, and usually you only get so many activates. so, set it up, activate everything, and then clone the partition to a spare harddrive. that way, when you reformat, all you do is reinstall that backup... it doesnt make it easier (because youll still have to update every freakin program to the latest revisions), but it does keep your stuff activated without killing your chances.