I've had an XP Pro laptop for almost two years and have yet to reformat the hard drive on it. I run Norton SystemWorks about once a month or so to clean things up. I've never used the system restore feature of XP yet.
On my 3 yr old desktop, I reformatted twice, but both times were to do clean installs of new OSs instead of doing upgrade installs. I haven't had to reformat that one in almost 2 years, which was when I upgraded that machine to XP Pro.
I definitely back up the important documents and pics that I have on rewritable CDs just in case a reformat may be neccessary