In most cases, there is no need to reinitialize any hard disk on which you plan to run System 7.0, unless the disk has been damaged in some way.
If you are using a third party hard drive, you should contact the manufacturer to get the suitable driver to update the SCSI driver before installing System 7.
Also, if your Apple drive was updated with an older version of Apple HD SC Setup, your partition size will be smaller, so if you then, update your drivers again with a more recent version of HD SC Setup, you will be told you do not have enough room. If you run into this situation, you will need to reinitialize your hard drive and then install System 7.
If you are planning to run Virtual Memory, use HD SC Setup version 7.0 to update the SCSI driver. This requires that you start up from the Disk Tools floppy disk, choose the target drive, and click on Update. This process takes a second or two to complete, and does not require any reformatting, or reinitializing, of your hard drive.
Note: Be sure to back up your hard drive before you initialize your drive. It is also a good idea to back up before you update to System 7.