Does recovery mode format delete game backups?

I'm wanting to run the kmeaw method, but I have already run the WutangRZA process and Geohot pkg.

When trying to restore 3.55 using \recovery method\system update, MultiMan, Gaia etc still appear in XMB.

If I do the \recovery\format option, will it also remove the games I've backed up?

Yep

Formatting/restoring the drive will delete everything however If your just updating the firmware it will not. This is want I would do, update to the OFW and then to the Kmeaw CFW.

I did my PS3(MGS edition) from OFW 3.41 to Kmeaw CFW without losing any my of games.