I never have much luck with system restore... recovery console yes, I've performed miracles with that, file backup yes, it's vital but that tends to be a lesson people learn the hard way.
For me... I'd rather have a partitioned hard drive, or better yet at least 2 separate hard drives, then get all documents onto a different drive/partition to the OS. I see the OS as the disposable part - Win7 will usually take less than a 3 hours to reinstall, I prefer to have a slick reinstall procedure waiting just in case (like drivers and software installers ready to go) and a solid backup procedure.
The main thing, is don't rely on anything doing anything that you didn't tell it to do. If you haven't setup restore points, or backed up data, don't expect a restore to work, don't expect your data to be recoverable. Users who value their data need their own procedures for backup, never rely on the OS to take care of this stuff for you.
Hell, I wrote the backup software we all use at work just because I can't trust other backup software.

I am the one who knocks...
