I would agree that the smell is probably the worst part of anatomy lab. It's a very strong chemical odor from the preservative (I don't think formaldehyde is generally used anymore, mainly alcohol-based preservatives now), and it gets in your clothing, hair, everything. Even in a well-ventilated room, the smell is very strong because of the number of bodies. The first couple of times are the worst for this, then you actually get used to it somewhat and don't notice the smell as much later, although other people around you probably still do. Don't wear anything to anatomy lab that you're not willing to throw out later--our school supplied scrubs which most people wore, and then changed into their street clothes afterwards.
As far as the emotional aspect of dissection, I found it to not be particularly difficult, and I hadn't dissected anything since a frog in 8th grade. It's weird the first day, but you really get over it pretty quickly (and this was true for everyone I know of). At my school, we started with the back and did the head and neck last, which helped--obviously starting with the head would have been harder. We did eventually bissect the head, but by that point we had been in lab for 9 weeks and it wasn't that upsetting. We kept the head wrapped until we dissected it, and the day we took the covering off a couple of people in my group were upset and cried, but by the next day they were fine. Some will be more affected by the experience than others, but no one in my class couldn't handle anatomy lab. I think most of us shared the OP's fears going in and they turned out to be unfounded. I also felt like the faculty and my classmates all had a good attitude going into it, there was a lot of discussion about respecting the gift we'd been given and support if people felt uncomfortable, which also helped. It is a great way to learn anatomy, and I think you'll find it fascinating and only mildly disturbing once you get past the initial strangeness.
