If you reformat the old hard drive, cloning it will be useless, as the reformatting process erases the drive.
Install the new drive, use disk utility to format it (using the Erase tab - that is how you reformat) if needed (you want the format to be Mac OS Extended (journaled)) then quit Disk Utility and go ahead and run through the installer. It's pretty simple.
Be aware that after you start up the MacBook will be as if it is a new machine. None of your data will be on there. You may be able to put your original hard drive in an enclosure and connect it to the MacBook and transfer the data over.
Do not reformat the old drive until you either have all the data you need brought off of it to the new drive, or you give up trying to extract it.