Best way to format the drive is to put the ps3 in safe mode.
How to access Playstation 3 SAFE MODE - PlayStation.com Forums
Once you get in there choose #5 PS3 restore, and it will bring the ps3 back to it's factory state as when you first bought it. It will format the hard drive at the same time.
So any settings in xmb, like wmv codecs...etc need to be re-enabled and adjusted. Best way to do it before you upgrade firmware.
Just remember to back up your game saves