At this point I wouldn't recommend creating a system image.
Your data worth saving would be Contacts, Documents, Email (locally stored), Favorites, Pictures, Videos, anything you treasure and can't live without. Understand that all programs and Windows Updates must be reinstalled.
For backup, you can simply grab a usb drive (size depending on the amount of data you wish to save. Storage is cheap. I just saw an offer for a WD My Passport Ultra 1.5TB Ext Hard Drive for $69 from Tiger Direct.
I would recommend that you open Control Panel open Folder Options Bring the View Tab Forward and change the following...
mark Show hidden files, folders and drives
Unmark Hide empty drives in the Computer folder
Unmark Hide extensions for known file types
Unmark Hide protected operating system files (Recommended)
Click Apply Click OK to close the window.
Connect your backup media
Click the Start orb Type explorer in the search field.
Choose Windows Explorer from the list.
On the left side Find your connected backup drive, open it and create a new folder. Name it something like Latest Backup.
On the left side open Computer, open the C drive, open the Users folder, open your user account.
Here you will find the folders containing the data you might want to save. I would also recommend saving the APPData folder. This folder will initially appear faded out until you open it in the right hand panel.
Copy the folders/files you wish to save (Right click the folder and click Copy or highlight and press Ctrl + C)
Paste the folder into the Latest Backup folder of your connected backup drive (Right click the folder and click paste or highlight and press Ctrl + V)
Once you are satisfied you have it all you can perform your factory restore, Install security software get your updates from Microsoft, install your software and migrate your data to the new installation.
When you have your system the way you want it consider creating a system repair disk and creating an image of your system. See Backup and Restore in the Maintenance Folder on your Start Menu.
Ask questions when necessary!