Yes you will need to format your drive. Reading NTFS (NT/2000/XP) partitions Linux can do fine, writing to them is still very experimental so it's not a suitable filesystem to use for a full install.
Some games you can, but the only game that consistently works under Linux without any problems "out of the box" is Unreal Tournament. All versions of it run on Linux
afaik, a Linux installer is included on the retail CD.
http://www.lokigames.com for some other games that have been ported.
Mandrake, Fedora, and SuSE are good distros aimed at desktop use.
There are far better mail clients than Outlook Express, you'll find plenty of alternatives
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Yes internet access through a router is easy to set up.
Yes Samba for file/print sharing is also easy to set up.