Hmm, not too sure I got all the details correct. The title of the thread mentions 'formatting', but the body infers 'reinstall.'
You tried to reclaim some space by formatting? That's certainly one way to get some free space =) But if your drive is out of space on the reinstall, it appears you haven't formatted. If that was your intention, you forgot that step.
If you don't want to format, you can delete your existing windows installation to free up space (since you're reinstalling anyways) for the new one. From a dos prompt type deltree c:\windows
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