Whats The Difference Between Upgrade And Full Install

Can I do a full install over the top of the old code without having to delete partitions and reformat and all that good stuff? What I'm confused about is the word 'upgrade' install option. Sounds nearly worthless to me, because I bought the full XP Pro SP2 package CD. I just want to overwrite the entire os without doing a format at this time. I know it's best to re-partition and format, start from nothing, but my problems are not that bad, and I think a full install will fix them, where as the upgrade install seems to not cure the problems I'm having.

Problems being it's much slower executing programs than it used to be, even the display properties applet tends to hang sometimes. These problems are intermittent, and they tend to get much worse as the day wears on. I reboot once daily, the machine runs 24/7. If I don't reboot daily, the os becomes unstable and unbelievable things start to happen. Don't you just love it when MS say's (again) that THIS version of Windows will allow you to kill off a hung application task, when in fact it can't if the application crashes just right.