I think System Restore is the most useful program default in Win XP. It has saved my computer from the dreaded 5 hour reformatt, reinstall, redownload all your programs and updates. I get pissed especially when I accidently instally those pop-up ad programs and when you try to uninstall them, sometimes you'll need to use a uninstaller from the program website but they just won't let you d/l that uninstaller! I just restore and eveything is fine and dandy.
i, however, have disabled it so i won't loose some precious files that i may have forgotten about.
I think you should frequently create restore points just like you should frequently back up your HD. If you find that the restore points take up too much space, just use disk clean up to delete all the previous restor points except the latest one.