I have a very similar checklist for doing complete reinstalls for people.
I would suggest adding
Spyware Terminator, free real time anti-spyware protection
Moving the Favorites, Desktop Folder and Firefox Profile Folders
And disabling system restore, which is redundant when you are doing complete backups.
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I am against installing any software anywhere other than C: and also against moving the page file.
I backup before making changes and restore if anything goes wrong. And I want a restore to fix 100% of the problems 100% of the time.
Problems can and do occur when you restore you OS to a previous state, without restoring all installed programs (including games) along with it.
What if a new game update causes more problems than it fixes, what if it breaks compatibility with old saved games, what if the update uses registry files no present in your last backup.
This may not happen all of the time, but it happens some of the time.
Obviously I then use a larger C: partition.
When I restore from a damaged OS, I backup before restoring so I can pull any files that were updated since the last backup. (Saved Games comes to mind).
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I also integrate the latest Driver Packs into my Windows XP CD and use an unattended install file.
At first I was suspicious that adding Drivers would lead to driver problems, but I have had no such problems. For a gaming system I usually then install the latest drivers for the graphics card and sound card.
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Obviously preferences and needs differ, and I am not suggesting anything you are doing is incorrect or less optimal.