First question, a format in many cases WON'T get rid of bad sectors, if it cannot be repaired during boot up or via the OS/Bios tools then no amt of formating is going to help.
Secondly, I think it should because it's built on the fantastic Unreal 3 engine which was built from the ground up to run on DX9 hardware first and foremost. I have a X1900XT and the Unreal 3 demo was VERY playable on my machine. By playable I mean I got a little jitter now and again running at 1280x1024 with all the eye candy. Granted I have a dual core cpu, and an XT not GT, but my card is 256MB and I doubt the clock difference will be enough to make it unplayable. You should be MORE than fine.