Without knowing what your current situation is I'm reluctant to comment. A low level format should pretty much wipe the drive, haven't actually done one since Win95, so I'm not sure and some people define formatting options differently. The MBR (Master Boot Record) is generally a product of the install and doesn't exist on a drive that has been wiped. But if you're dual booting and or talking about a particular partition rather than an entire drive, then the MBR will contain information about other OS's you have installed so if that's the case and you have the option to leave it alone then I would leave it alone. Are you using some third party software to perform the "Low Level Format"?, Are you just applying it to a specific partion?
The # sign is a coding symbol to comment out a line, so when whatever is parsing the hosts file it ignores the lines starting with the # symbol.