I'm not rooted, so if you are I have no clue what will happen if you factory reset, but if you aren't rooted, factory reset takes it back to the way it would be if you purchased a brand new droid with froyo preinstalled. I actually had to call an automated phone number to activate service on it (all automatic) and re-enter my gmail info. It only takes about 5 minutes to do that set up, then reinstall all my apps.
I tried using astro to back up my app settings but it didn't work, it backed them up, said it restored them, but none of the settings came thru, I had to reset them all up... not a big deal though. Most of my apps had minimal settings changes. All told it took about an hour to get it all set back up.
So far so good on the home screen, the icons still occassionally "pop-in" instead of just being there, but now its a less than a second delay instead of 5+ seconds like before the reset.