While USB flash drives are nice for transporting documents and other small files, they aren't ideal for backing up photos (for that, you'll need DVD-Rs and/or external hard disks). Backing up is something you should do all of the time, regardless of any need to reformat.
However, something that I've been doing for years that makes reformatting much less of a pain (no need to restore from backups) is to use separate disk drives for the operating system and applications and for data. In particular, I have a 36GB Western Digital Raptor drive to store the OS and applications, and a 300GB Seagate to store pictures and other data. While this data is still backed up to DVD-Rs (and as soon as I can order one, an external hard disk), having it separated from the drive that contains the OS and apps means that I can reinstall the OS without touching the data. In fact, usually I will unplug the data drive while reinstalling the OS to ensure that nothing bad can happen to it accidentally.
Note that you can also implement this scheme on one drive with partitioning. Partitions are best set up with the drive empty before anything is on it, so you may have to back everything up onto DVD-Rs (make sure to VERIFY that they burn correctly!) for one reformatting cycle, but after that the problem will be mitigated. The way you'd probably go about this is to delete your current partition during the Windows installation, then create a new smaller partition for Windows. After the installation, you can create a larger partition in the remaining space and restore your data into it.
An alternative is to consider something like Partition Magic, a program that can resize and create new partitions without reformatting. Beware that these changes can be fatal to your data, so it is extremely important to have backups even though you may not need them.
Briefly, on partition sizes: on an 80GB drive, I'd recommend 20GB/60GB unless you install tons of programs or games. On a larger drive, you could push the OS and apps partition up to 40GB, but usually there's not any reason to make it larger than that.