I never just back up the users folder, it isn't a default storage location for way too many programs. Also if you just do that then you aren't going to grab their bookmark files for Chrome / Firefox / IE. Plus if they use Outlook you are going to miss valuable data or at least make it hard for them to find if you don't manually reload it first.
This is not true at all. Every single one of those things you listed is stored under C:\Users\
Google Chrome files are - C:\Users\Shawn\AppData\Local\Google\Chrome
Firefox files are - C:\Users\Shawn\AppData\Roaming\Mozilla\Firefox
Internet Explorer is stored in several folders. For example, IE bookmarks are stored under C:\Users\Shawn\Favorites
All of your saved games for things like Borderlands and Fallout 3 are stored under C:\Users as well. For example, Batman Arkham Asylum is saved under C:\Users\Shawn\Documents\Square Enix\Batman Arkham Asylum GOTY\
What happened with my dad's computer is that I helped him build a new computer. Obviously you can't just pop the hard drive from one computer into a completely different computer, so we had to install fresh. We copied C:\Users\ into C:\BACKUP\. Install Windows (only took about 10 minutes because I have Vista on a high speed flash drive and his new computer uses an SSD). Copy your entire profile from the backup folder into the active folder, so copy C:\BACKUP\Users\Shawn\ into C:\Users\. Overwrite? Say yes to all. Now you'll have all of the settings you previously had. Firefox is exactly the same as before, and it even opened the same session that he had going on the old computer. All the extensions are there, all of the bookmarks, everything. Outlook retained all of its settings and was able to fetch his email without asking for a password or a name.
Really, reinstalling Windows takes very little effort. It's only slow because there are several gigabytes of updates to download. The service pack for Office was something ridiculous like 600mb.