UNIX-based Operating Systems rarely, if ever, need to be reinstalled. This is a bad habit many of us bring with us from Windows, where inevitable registry corruption often leads to a need to do a clean install periodically.
At worst, you may need to create a new user account, but a full reinstall should not be necessary.
Heat can be caused by a number of factors, most notably in older machines, dust can build up in the ducts that are used to bring cool air in, and exhaust warm air. A few quick blasts of compressed air into the vents can work wonders for this.
Also, if you have programs that are running in the background unbeknownst to you, the added CPU cycles can lead to excessive heat. Try opening Activity Monitor and sorting the processes list by CPU utilization. That can often clue you into what's going on.
As far as the iSight cam, there's really not enough detail in your post to take a stab at what's going on there. Are there any error messages when you open programs that take advantage of it? Is the malfunction limited to one particular program, or all of them? Does the problem occur in Photo Booth?