As far as I know, you can simply reinstall Windows on top of the existing installation without losing anything at all. First of all, Windows is not going to touch your data at all. Secondly, once you finish re-installation, you'll find all you programs, shortcuts, desktop items and settings as they were before. Well, if not all, at least most of them. I have reinstalled WinXp over my existing installation umpteen number of times without any problems.
And of course, as BigB suggested, the best strategy is to have multiple partitions and assign them specific tasks eg. I keep C:\ for the OS, namely barebones Windows98, d:\ for a second OS, namely WinXP and applications, e:\ for data, f:\ for multimedia (video) and g:\ for multimedia (Audio). This way it is easy to backup any partition when required. You may ask why Win98? Believe me, it does help at times to tinker around with Win89 when WinXP crashes. Also, as far as I know, the only way to create a full bootable system floppy disk is through Win98. The outdated floppy disk does come to our rescue at times when all else fails.
Hope this will help solve your problem. Keep posting.
Best of luck.
Chinmoy