First off, no you do not need to reformat your hard drive. It sounds as if you have low resources on your pc and there are a few things you can do.
You can definitely stand to use another stick of memory, that's for sure. I have 1 gig of memory in mine, which is about 8 times what you have, just so you'll know the difference. Before you set out to buy another 128MB stick of RAM, be sure to pop open the case and read the label on the stick to see whether it is PC100 or PC133.
First thing you can do is check your resources. Right click on 'My Computer', then 'Properties' and 'Performance'. If it's showing less than 85%, you have too many programs running in the background. To maximize your resources, go to 'Start', 'Run', type 'msconfig', press OK, click the 'Startup' tab and uncheck all items except System Tray, Scan Registry, Task Monitor, and Load Power Profile. Click OK and restart the pc.
Let me know if this helps.