it is recommended i do a back up before i do a hard reset of my playbook. i have been told to do this reset because I can't remember my password. wouldn't i need a password to do a back up? what are my options?

If you have any files or information that you would like to save before wiping your PlayBook, then yeah, I don't see a problem with that.

If there is nothing that you can cannot xfer to the PB after you wipe it, then I wouldn't worry about it.

so, if i've downloaded books into the kobo, would i lose that?

No, you should be able to load them back when you reinstall Kobo.
I assume you have an account? You have not been sideloading ebooks have you? Then you may have to load em up again.

no... i am a firm believer in compliance with copywrite...