Removing the index will lose the changes you've staged ("git add"ed) for the next commit, but your working directory won't be touched. If you've added a file and then modified or deleted it, you would lose the version of that file that was in the index."git reset" then rebuilds the index identically to the HEAD commit, but without the staged changes and (importantly) the stat cache. The point is to make git re-check every file to see if it has been modified.
Sorry, I should have mentioned the downsides.
- Eyvind