Only when the OS has failed horribly. I find Win7 handles upgrades just fine, hell i've even changed from Intel to AMD without reinstalling and it's been sweet as a nut.
I also use Acronis to do an image of a clean install of the OS, with all the updates etc to that point..
I only usually do it once in while if I notice the PC is becoming bogged down too much..
I store all documents/email/files on the NAS or other partitions/drives in the PC, and since the image has all the main apps I use already I don't mind doing it.
These days, pretty much never. I used to format XP every six months or so, because it had slowed down a lot by that point. But it's just not necessary with newer versions of Windows. I've had 7 installed more or less since launch, and feel no need to format it.
When I had XP and was into computers as a hobby I use to re-format far too much just to get a bit of performance. Since Windows 7 was released and I started working in IT, I haven't reformatted once Just want to come home to a working computer and not have to mess around on it!
I have a mate who is extremely paranoid PC wise. He seems to reformat on average every 2 weeks. Rather than looking for answers to his issues he just reformats. For example the first time he noticed the favicon at the beginning of the address bar in IE he got worried he had a virus and reformatted. He has been on the internet for about 9 years so he is not a newbie.
Only really ever when I have a major PC upgrade. I used to do it more frequently as it felt like "sping cleaning" but since I use my pc for so much more than games now, reinstalling everything has become a serious chore
I'll be formatting/reinstalling when SP1 gets released as I'm going to use that opportunity to swap from 32bit to 64bit and (hopefully) double up my RAM to a more useable 4GB
Though trying to find 2x1GB Dominator DDR2 kits for the right money (as little as possible) is proving to be difficult
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