Primary (OS) HD Formatting
I personally do not and haven't tried formatting Windows within itself. The process I use and have used for a long time is:
1)Insert Windows CD
2)Restart comp
3)Boot from CD (if comp is not doing this, then go to BIOS and change the first boot device to the cd-rom/dvd-rom)
4) Now, within the setup you can reformat and reinstall windows, etc.
Secondary (Multimedia, Games, Etc.) HD Formatting
If you are just formatting a secondary HD for multimedia, games or whatever, just go into My computer and right click on the desired HD and format it.
*Note* if there are any errors in this post please tell me in any of the following posts, I'm not omniscient.