I reformatted my computer and now I'm trying to re-sync my iPhone.

I just reformatted my computer and now I'm trying to re-sync my iPhone to my new iTunes library. When i try sync it, it tries to sync my new library on top of my old iPhone library instead of replacing it. So it's trying to add another 20GB on top of my old 25GB library. Why isn't it just erasing all the stuff i don't have anymore like it usually does?

the issue that i think you are encountering is the "device was synced once before" to an account. now your resyncing the device under technically a different account (granted it was a upgrade or clean install to win7 most likely win said do a clean install) things changed and account relationships (pointers changed) causing duplication.
you could manually delete the duplicates in one of two ways.
directly on the iphone or with the settings I had mentioned (go to itunes - file - display duplicates)
but I would most likely try and take them off the iphone instead.
here is a thought, let us assume that you have itunes open....and your in your music library.
from the space and duplication issue
can you create a new folder on your desktop.... then drag x number of songs to the folder (technically creating a back up copy)..... then litterally go back to itunes and physically delete the copy (moving it to trash - two step process - delete from playlist - delete from library) freeing up "space as it were"  to get you past the   space issue your encountering when you attemp to sync.
techmically this would give you a back up of songs, but reduce the number of songs being syncd
then you could, connect the device with the reduction of songs accross the boad (itunes)
it would possibly get you to the point where you could do a sync and not run into any issues (thats a goal here)
if you got to that point
you could then disconnect the phone, you would readd the folder that you created on your desktop to itunes
you could the eliminate the duplicates (from the library and ideally have one set of songs) to sync with checkmarks to your phone when you reconnected.
And you are correct. step 2 would cause songs to be lost
you would loose the 500 off of the phone, thats why option two was a concern (loosing the 500 songs)

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