I would wait for the New Nvidia GPU's to come out on march 26th. If they are good and you can afford them, great, if not, then get a 5870 at that time, which may drop in price a bit around that release.
You don't HAVE to format. I normally do, but it isn't necessary. It is, however, a good idea to use driversweeper in safe mode to make sure it is completely removed, though sometimes its not an issue at all.
Playing @ 1920x1080 here with an old 8800 GTS 640 and everything runs fine. Your GTX275 is fine and you could squeeze a little more power out of it by overclocking it. Though you should read carefully about overclocking as you also ruin your gfx card.