I believe Microsoft borrowed (sorry, innovated) an idea from Apple and has something along the lines of the Archive and Install option Apple had for years. Basically all the system files that make up the OS get dumped into a subdirectory and a fresh copy is laid down. You'll still need to reinstall apps, because they won't work without some of the registry keys the installer makes, but other than that, shouldn't be a problem.
I recently updated my vista home computer 32-bit to windows 7 32-bit using the update option on the windows 7 installation disk. Something went awry in the process and i have multiple missing files and error in windows 7. The repair option has done very little to shed light on what has happened and i have decided to simply reformat the drive and do a clean install (probably what i should have done in the first place). I want to save all my files that i have saved on my main partition but it would take me far to long to copy every individual file over to my secondary hard drive. Is there a program that i could use to copy over all of my personal non system files to temporary folder while i reformat and install the OS or is it going to be a long process of copy and paste?