I usually do a format/reinstall about once a year depending on how much I have done to it. Thrashing isn't always remedied by a good defrag so eventually your computer will slow down noticeably.
One big tip, burn ALL your drivers to CD. At the very least your NIC driver so you can go to the manufacturers site and get the rest if needed. However some prebuilt PC's have custom drivers that are very difficult to find even on their website.
Backup your data and go for it. It's really as simple as putting in the CD and following the prompts. Delete the current Windows partition and either create a new one or just use all of the space available. And don't use the quick format. Depending on the size of your drive and other factors, allow an hour or more for the whole job. Formatting a large drive takes a while.