Time Machine or Disk Image

Hi Everyone,
I want to backup my data to be sure that in the event something goes wrong I can get it all back again. My question is, in the situation where for some reason I have to reformat my hard drive, will there be an option in Time Machine to restore the system completely to a working version? As in, can I just go and reinstall it using the Time Machine data and get everything back?
OR
Would a disk image do this or do the exact same thing? If I created a disk image of my entire drive, after reinstalling the OS and formatting the HD, could I just load the drive as it was from a disk image?
I'm mostly concerned about my applications. I realized recently that several of my discs have gone missing and thus I no longer have my registration codes. I'm looking for a much easier way than having the hassle of contacting the companies or having to repurchase if things go wrong.
Thanks for your help!
Cheers,
Jillian

Here are a few points regarding what will be needed to get back up and running.
If you back up with Time Machine, you will need both your Leopard install disk and your Time Machine backup, in order for Time Machine to put it all back together.
If you back up to a disk image, you need to be able to boot from an external disk of some kind, or attach your Mac to another Mac, because something has to open the disk image and clone it back onto your original Mac that had the problem.
If you back up to a bootable external hard drive (using Disk Utility, SuperDuper, or Carbon Copy Cloner), you only need that drive. You can boot from it and use it to clone itself back to the Mac.
As far as the software licenses go, it's really hard to predict what will happen unless you have an exact list of which software it is and you know how they store their registrations. Looking at my own Mac:
1. Some software stores registration info in the application, so it moves with the application. No prob.
2. Some software stores registration info in a separate file. Sometimes it's in the same folder as the app. Sometimes it's in the Preferences folder. Sometimes it's in the Application Support folder. As long as that file is still where the program wants to find it, you're OK.
3. Some software does #2 but makes the file invisible, making it hard to locate.
4. Some software does #2 but gives the file a name that does not identify which application it belongs to, and encrypts the contents. So you can't figure out where it is or what it looks like.
5. Some software does #4 and has tied your registration info to a specific hardware combination, so there is a possibility that if it finds itself on a modified computer (e.g., you replaced the hard disk) it will notice the change, and fail to register.
If you are lucky, your software will be easy to migrate. But the more expensive or established the software, the more likely it is that at least one of your programs will need to be re-registered due to anti-piracy measures taken with the registration storage.

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