1) Yes. See if Outlook has an option to export your settings / emails, and then later when you reinstall Outlook you can import them.
2) XP installs pretty fast compared to older versions. 1-2 hours would be my guess, if you know what you're doing.
3) Could be true. You'll see, won't you? (Thank Microsoft.)
4) I think that with XP, all you do is boot with the CD in the drive. XP should give you options pertaining to your partitions. You want to delete the partition where Windows is installed. That might be the only partition you have. Windows may offer to try to Recover or Repair your previous installation. Don't let it. You want full deletion.

Backup everything you need. You will lose everything. Look through your whole HD for files you think you might need. It's easy to forget something.

When you have a new install of Windows, it's probably not going to have the service packs installed, depending on how old your CD is. That means that you ARE going to get any Blaster-style worms that are looking for hosts, unless you have a hardware firewall. I would advise you to download SP1 at the very least and maybe SP2 as well, in stand-alone .exe format, if available, and burn it to a CD. When you install Windows, don't set up your networking at all. Install the service pack, then set up your internet connection once that's done with.