There's no need to reformat to install an updated Office package.
If you can open the folders on the disks now, and your pictures are there - then they'll still be there whatever you do to your computer - whether you install a new office package or reformat.
Pictures are not related to Office - it's your documents, spreadsheets, etc that you need to backup.
Why buy an office package at all? Open Office is well up to the mark, and totally free. It can read all your office documents, spreadsheets etc - even the new .docx format that Office 2007 uses.
You'll be very surprised at how different the Office 2007 interface is - more than a small learning curve.