Aye, partitions are the way forward if you have a big-ish drive.
The only thing you ever really want to format is your utilities and programs but most of all Windows itself.
C:\ Windows & stuff
D:\ Downloads (patches, drivers and installers)
F:\ Freespace
G:\ Games
M:\ Media (vids & mp3s)
P:\ Pagefile (to keep it from fragmenting)
When the machine goes tits up, I format C:
When it comes to defraggmenting, I clean C: and G:, the rest can stay crappy until I'm bored.
If you're formatting, the important Nam folders are your settings&profiles and pb folders(just in case).
Redoing your profile to how you liked it sucks teh cock.