NO. Whoever told you that you had to reformat must be crazy.
...No, not really. But it is a very wrong notion. You just have to uninstall the older drivers (The NVIDIA drivers) and install the new ones (The ATI Catalyst drivers). This goes for both Win7 and XP.
Optionally, you can use a program called driversweeper to make sure that there are no remnants of the older drivers.