BIOS, backups & partitions
So many questions...

My set up:
CPU: Intel Core 2 Duo E4300
MOBO: Asus P5N-E SLI
RAM: 2 x 1 GB
HDD: Western Digital Cavier 250 GB
CD/DVD: LG Super Multi DVD Writer
Video Card: XFX GeForce 7600 GS
OS: Windows XP SP2 OEM

This was a custom build and put together by the computer shop with the OS loaded by them.

MOBO BIOS
Is it necessary to flash the BIOS if everything is running alright? The forum on the Asus website has differing opinions on which is the best BIOS but that the current version that I have 0202 is stable. 0401 is recommended though.

HDD Partitions
What is the benefit of having a HDD partition that has the OS separate from the other files? From what I have found on Google it is to make backing up easier. What OS files need to be moved to this partition?

Drivers
Which drivers should be updated? Video card, sound card and CD/DVD drive? After updating them how do you back this up? I have Nero 6 Express which has Backitup.
If after doing a clean install (if I ever need to) can this backup just be copied over the system folder (C:\WINDOWS\system32\drivers) and everything will update and work correctly?

Backing up
As I said I have Nero 6 Express which has Backitup. I am not worried about backing up My Documents, this is easy enough, but what needs to be on a bootable disk if something happens? Is it really necessary when I don’t have problem doing a clean install if the system crashes or gets infected since I have all of my personal documents backed up?