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I need to upgrade my OS, as well as fix the formatting of my main HDD (APFS is not ideal for HDDs).

Is it advisable for me to completely start over with a fresh OS install (Sonoma), and then restore all the user data on my current system? What is the best way to do a reformat + fresh OS install like this, given that I have an external Time Machine backup?

(The normal Software Update process isn't working for me, which I initially asked about here)

Hardware: 2019 iMac (intel processor)
OS: Catalina 10.15.7
Current volumes:
- Internal 1TB HDD (APFS)
- Internal 28GB SSD (APFS) 
- External 1TB SSD (APFS) - Time machine backups of HDD volume

One approach would be: Boot into MacOS Recovery Mode > Reformat disk in utility mode > Install new MacOS. At that point I'd be running a completely fresh system; how would I restore my user data from Time Machine back onto the new system?

Side note: would there be an advantage to using the 28GB SSD as the bootable OS drive, rather than my HDD?

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The only reason for wiping the whole disk is your requirement to switch to HFS. Normally, upgrading the OS should never require erasing anything. There is no point in a "clean" install, if you then put everything back. ;-)

I'd be running a completely fresh system; how would I restore my user data from Time Machine back onto the new system?

When you first boot from the OS, it runs the Migration Assistant, which will prompt you to restore data from a backup.

would there be an advantage to using the 28GB SSD as the bootable OS drive, rather than my HDD?

28Gb is far too small to run an OS from. It barely meets the free space requirement to install Sonoma.

Is it advisable for me to completely start over with a fresh OS install (Sonoma), and then restore all the user data on my current system?

The best advice I can give you is not to boot from an HDD at all. It's a massive leg-iron on your 2019 CPU. (Much more so than the difference between HFS and APFS.) If you don't want to open your Mac up, even running an SSD as an external drive would be a significant performance improvement.

Your hard drive is nearly 5 years old, so you should expect it to fail at some point. (It may, it may not: but you should be prepared.)

I certainly wouldn't re-fuse the SSD and HDD together. When one part fails, you lose the lot.

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    Agreed. I used an external Thunderbolt SSD as the primary boot drive for an older iMac years ago. The External SSD was surprisingly performant. I used the system for many years before upgrading. If you are installing macOS on a freshly formatted drive you can easily download the version you want and create an installer on a USB key or your 28GB drive. The OS install process has an option to format a drive before installing. It's in the utility menu early in the install process. Commented Jul 2 at 14:18
  • This was just the reality check I was looking for here. Sounds like it's time to go shopping for a new SSD (possibly internal NVMe) Commented Jul 2 at 22:07
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I'd recommend to use an external SSD if your Mac only has a spinning hard drive. The later macOS versions (Ventura, Sonoma) are not designed for hard disks and won't be performant if not installed on SSD. With the mac you have, you can get good performance by using a USB 3.2 (or even better, but more expensive: Thunderbolt) NVMe enclosure and a quality NVMe SSD.

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  • This was my thought if the OP couldn’t follow the Apple erase install instructions or the highly voted answers here explaining what to do. Much safer to get a second system going before erasing the first.
    – bmike
    Commented Jul 1 at 13:23

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