As long as you are using a disk with the same version of the OS, it won't matter if you installing over the top.
For example, Win XP Pro disk over a Win XP Pro install will work but a Win XP Pro over a Win Xp Home won't.
Go to the My Computer icon and right click on it, then select properties. The General tab in the box that pops up should show Who the software is registered to and the activation key. Write those down for safe keeping.
Start the Win re-install and install to the main directory. You should get a box saying that an existing version of windows is there and asking to confirm to install over it.
The install program should pick up the existing activation key without you having to do anything there.
As for the paragraphs, I use two hits of the enter key to spread things out. You must make sure that you have a US keyboard setting in windows otherwise your linefeeds are stripped out of the text.