The SteamApps folder has everything in it, all game content files and all game configs and settings. If you want to back up just the save games, use the folder I posted above, else, if you want to back up all your games as well, then back up the SteamApps folder. If you want to back up all your settings etc, but don't want to back up your game files, simply back up the folder with your Steam usersname found in the SteamApps folder. You can use the backup system, but that will only back up your game files, and not the game saves and settings I don't think.
You will always need the internet to initially set up Steam and allow your backed up games to get re-activated.
As you're formatting for Vista, I suggest:
Backup SteamApps folder
Do all your Vista install stuff
Install Steam.
Log out of and exit Steam.
Copy SteamApps folder to Steam folder.
Delete clientregistry.blob file found in \Steam\
Start Steam and log in.
Load Half-Life 2, it may or may not want to download a couple of kb update, but it should work fine.