If you look at how WinFS is (to be) implemented, you can see how this would work.
First off, WinFS is built on top of NTFS. Legacy files formats and things you would want to keep as files such as streaming video are store as NTFS files. Certain folders on that NTFS are designated as WinFS stores, and the system watches those folders very
closely and keeps the metadata for those files synchronized with its own database, kept somehwere else. WinFS items could also exist in that database without any representation on NTFS (like SQL records in a table).
If one had to install Longhorn 2006 from the orginal install disks onto a NTFS drive that once had WinFS stores, I could see the following happening. The database for those stores would be a file or files somewhere in the NTFS laying dormant. Legacy files and
such would still be there in the directories. The metadata might get out of sync if you started editing those files, but this is unlikely as you would probably want to apply all the SP and whatever to get your WinFS functionality back. At that point, WinFS
could pick up your old databases, resynch the metadata if needed, and you'd be back in business.
Also note that WinFS stores are meant for user data. OS and application files would not be in WinFS stores. The OS would run fine before the WinFS SP was applied.
Think about it this way. If you put a bunch of stuff in SQL server or MSDE, and had to reinstall the OS, you'd lose all of your data, until your reinstalled SQL server (or MSDE).
At least that's the way I look at it.