I'm planning on formatting my hard drive and deal with all the hassle that comes with it. My one concern is, where is the saved game file for DayZ? Will I be able to transfer it to my fresh new install of Windows, or will I have to start a new character?
Your DayZ character is stored server-side and is linked to your CD-Key. As long as you are playing with the same CD-key, you will have access to your character.
To expand on OrigamiRobot:
The DayZ 'team' has what's called a 'Hive.' Think of this as a central database where everyone's character data is stored.. that is, your coordinates, your inventory, stats, everything.
The only thing that is local to you is your ARMA profile. For example: Player Name/Skin/Squad data.
You'll notice if you ever have joined a 'private' server that you have to start on the bean coast, this is because each private server has it's own local 'hive.'
Your dayz hive data is based on your CD-Key. If you were to buy Arma on a different steam account you could essentially have 2 DayZ characters.