right click on desktop -> properties -> settings -> advanced -> 3D -> Direct3D -> use user settings -> and there you move the 2 sliders to the right (6x and 16x) ...turn on lfs and you will see the difference
IMO uninstalling is only needed when you either downgrade, or switch brands (from ATi to nVidia). I've never uninstalled my drivers when upgrading and I yet have to experience problems with this method.
But it really depends on who you ask. Some people are really paranoid about this and recommend to completely clean your system of any driver trails (like in temporary archives, etc) each time you change them. Personally, I wouldn't be too concerned. I mean a million of other users was able to install them, you will be too.
I know it says that in the Control Panel, but I run LFS @ 1920x1200 with 4xAA and 2xAF on my 9800. Works like a charm. Any more of either, and it's is a no go though. (The 9800XT can probably go even higher. 256MB RAM on those.)
In such high resolution, I would lower the AA setting to 2x and raise the AF setting to at least 8x. I believe that in such high resolution AF tends to be more critical to image quality than AA, since higher resolution round the edges, but don't fix the texture anisotropy problems.