im very new to this myself....like i only rooted it yesterday , you need to put new rom on the sd card (not in any folders) then reboot phone and go into recovery menu, has for wiping you do it all from there, i myself fully wiped because i wasnt sure but had my setting and contacts backed anyway.

regards will

 

If you are making a small step, for instance from Villain 5.4 to 5.5 you generally don't need to wipe although some claim to have better results if you do. If you are changing to a completely different ROM then you need to boot into recovery (hold Home and Power on) and first make a Nandriod backup (it's good practice to do this every time before installing a new ROM. Then go into Wipe and click through each wipe option. You're then good to apply the update.zip of the new ROM you want to install. FYI it'll take a long time to boot the first time.

Regarding going to MoDaCo 3.2 you will be back on Android 1.5 and will lose Bluetooth (accept for voice) and will have the old Market and old Maps. You will not be able to run any 1.6+ only apps. Although MoDaCo is much faster than stock 1.5 I've found the 2.1 ROMs to be even quicker.

 

Bugless Beast

 

Dont try Villain 6 Its laggy as hell! 5.5 is very good though