See, that depends on u. If u want to take backup of ur user related files / folders then simply backup those files / folders.
If u r going to format and reinstall XP then it is not necessary to taking backup the system files. Better u have to note down these :
1. IP address
2. Display card
3. Lan Card
4. Internet gateway and others realated…..
The softwares u r using, it is necessary to install once again after fresh install of XP. If u r going to repair xp then nothing to do, just repair XP and after that all files including (user files / folders and sofrwares )all are intact as it was earlier. However u have to take registry backup before doing all of these.
You cannot actually backup the Windows XP because it is an Operating System. However, you can use a image cloning software to backup the entire image of the hard disk drive, which means that you could backup not just the Windows XP OS, but also the software installed and files stored into the hard disk drive.