Glad to see
do the drives need to be reformated and backed up?
If you do the reformat first then there's no need for the backup since the data will no longer be there.
The source of this information should be the release notes, which do not mention a reformat, so it should be safe to assume that one is not required (and I did not need to do one when running the beta),
provided you choose to continue using an ext2 file system. 1.08 reintroduces the ext3 file system as an option, and if you wish to go that route, then a reformat IS required, the backup is optional, but as mentioned above, if you don't do it, you will have no data on the drive.
For what it's worth - if the data is of any value - then you do need to back it up, wether or not you're planning a reformat or a firmware upgrade.