Format disc and install Lion

The startup drive on my 5 year old macbook is full and in desperate need of a clean start. I have just removed a windows partition to reclaim a bit of space.
I have backed up to time machine on an external drive.
I am going to purchase Lion from the app store and install it (currently running snow leopard).
I will need to reinstall windows as well through the new version of parallels so that I can run applications for my job not available for OS X.
A few questions
1) When restoring from time machine, can I select what comes back on to my drive (thus removing the junk)? I have no experience using time machine to restore anything.
2) Do you recommend doing it this way or is it better to manually go through my drive and clean it (I have repaired the disk with disk utility but I need to wipe a lot of applications and photos etc...this feels very overwhelming....i feel like the clean start might be easier)
3) I have seen "merge assistant" but it seems you can't merge TO an external disc - you can only merge FROM an external disc. Is this true?
4) any other potential solutions? Suggestions?

Remember to install Windows on Boot Camp before you upgrade to Lion unless you have Windows 7 since only Windows 7 can be installed on Lion.
Also Lion doesn't run any Power PC programs. To see if you have any Power PC programs go to the Apple in the upper left corner and select About This Mac, then click on More Info. When System Profiler comes up select Applications under Software. Then look under Kind to see if any of your applications are listed as Power PC. Universal and Intel will run under Lion.
Before Mac switched to Intel processors they used Power PC processors from 1994 to 2005. Power PC 601 through 604, G3, G4 and G5. Applications written for the Power PC processors need the application called Rosetta to run on Intel processors. This was part of the Operating System in 10.4 and 10.5 but was an optional install in 10.6. With 10.7 Lion Apple dropped all support for Power PC applications.
And check http://roaringapps.com/apps:table for other programs.

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