Alright so I wanna reformat but what I want to know is can I use my windows XP CD to put another partition on my drive before I do the reformat without deleting the OS?? I want to save some files on the second partition so that I don't lose them when I reformat.

No, Windows XP installer does not support resizing partitions. You need special partition management software to play with partitions without deleting anything.

Do you know of any good free partitioning software. I tried partition logic but couldn't seem to get it to work.

The only free one that supports NTFS resizing is parted and its graphical frontents gparted and qtparted. GParted offers a CD image for download so you don't have to use some random Linux distro.