That sucks 'BIG TIME', well gutted for you there.

Your friend from microsoft has taken a bizarre and extreme measure in getting you to format and reinstall your operating system.
I'm very shocked that your friend did not suggest you use your install disk to attempt recovery as opposed to reinstall.
Viruses do not ordinarily work that way, someone has corrupted system files, most likely drivers, but having said this, you need to make sure there is no virus 'still' on any discs you may have. There are certain types of sites which everyone should stay well away from, I'm concerned that you may not have a suitable firewall installed and properly set-up, and fully updated anti-virus software. These are musts haves for internet usage.
Try to take steps to back-up files in future, a superb method of doing this is purchasing a dvd rewrite drive and using dvd rewrite discs, they store in excess of 4Gb of information, this would be hundreds of thousands of picture files, well worth looking into. You can get external dvd drives which plug into USB ports, this would make it your hardware which you can connect to any computer.