Yes a clean install is usually best.
If you're going to Windows 2000 then the installation is extremely easy. I haven't setup XP yet (my XP machines came pre-installed), but I'm assuming it's going to be very similar.
1) Make a backup of all your data to your big drive (just copy it that is). Gather all necessary Windows 2000 drivers, preferably on floppy disk.
2) Make sure that your OS disk is on the standard motherboard controller, and not on an ATA controller (like from Promise, Highpoint, etc).
3) (you can skip this step) *Carefully* disconnect power and data from the backup drive. Be sure to always have some part of your bare skin touching a metal portion of the case when handling any components! We're disconnecting this drive to avoid the most common problem of all: "oops."
4) Boot from the Windows 2000/XP CDROM. That's assuming that your system can boot from CD's, and it probably can. You might have to change the boot order in your system's BIOS setup.
5) The setup program run. After a bit of silliness, it will detect your hard drive and display partition and format information. You're going to want to a) delete the partition(s) b) create a new partition c) when it asks, choose to format with NTFS.
6) The setup program will partition and format the drive, then copy over all the necessary files and reboot your system. Windows will start up and you'll get to go through all those lovely configuration wizards and install all of your drivers. NOTE: device manager can be found at Control Panel->System->Hardware->Device Manager (just a little different from 9x)
7) Once the system is up & running and all drivers are installed, shut down. If you had your OS drive on an ATA controller, you can put it back now. Reconnect the big drive you used for backup and start the machine back up. Windows will automatically see the drive and you'll be able to access your files.
In most cases installing Windows 2000 is completely painless. In fact, I've found Win2k to have the best driver support of any windows version to date. Some hardware will basically "install itself" it's so easy. HOWEVER, you better make sure that you check all your hardware and software for compatibility before you get into this. At the very least, make sure you've got the drivers on hand to get your system back on the 'net ASAP.
Also, the reason I suggest that you disconnect your backup drive while installing windows is that I've just seen too many people zip through installations without paying much attention. If you don't disconnect the drive, then make damn sure you don't repartition or format it!
P.S. you can also do a clean installation by inserting the Windows 2000 CD when running Windows ME, and choosing to upgrade. It will give you an option to either do a clean upgrade or to upgrade preserving the existing system. I've done one clean install this way and it seemed to work ok....but basically the steps I outlined above still apply for the most part.
Slackmaster 2000