Not an unwise decision to make. In some instances an infection may have caused so much damage to your system that it cannot be completely cleaned or repaired. Wiping your drive, reformatting, and performing a clean install of the OS or doing a factory restore removes everything and is the safest action but I cannot make that decision for you.
Reformatting a hard disk deletes all data. If you decide to reformat, you can back up all your important documents, data files and photos. The safest practice is not to backup any autorun.ini or .exe files because they may be infected. Some types of malware may disguise itself by adding and hiding its extension to the existing extension of files so be sure you take a close look at the full name. After reformatting, as a precaution, make sure you scan these files with your anti-virus prior to copying them back to your hard drive.
The best proceedure is a low level format. This completely wipes the drive. Then reinstall the OS.
Use the free version of Active@ KillDisk
Or Darik's Boot And Nuke
The best sources of Information on this areReformatting Windows XPMichael Stevens Tech
Of course also feel free to ask anything on this in the XP forum. They'd be glad to help.