No, it won't. just select custom, give a size like 99999999999. And it will backup as a single file along with some small files. Total 5 files I guess.
1) Download game
2) Backup
3) Format
4) Install Steam
5) Login
6) Restore Game
7) Play
8) If any updates were made, backup a fresh copy.
9) Continue from 3)
Hope its clear. Or better, just make a image of your C:\ drive with a software like Macrium Reflect. Will save you hassles of reinstalling OS again.