System restore is a really good utility, but it's necessary to recognize a couple of limitations.
System restore makes a copy of your system settings each time your computer is restarted. If it's turned on, it may invisibly use one of its backup copies of your system to repair something that's found, mainly by the PlugAndPlay (PNP) scan at the next startup. You won't normally even know that this has happened.
If a complete restore is needed, it should ask if you want to go back to a prior version, and allow you to choose which one.
If you have a problem, like the one described, you can manually initiate a system restore. That's when you actually see that it really does something.
Problem #1 is that the utility only keeps the most recent few configurations. Each new backup pushes the oldest backup out. If you restart a few times during your efforts to fix something yourself, all of the few configurations saved in system restore may be "buggered" by the changes you've made recently, and no version remaining in the utility's records may go back far enough to get to "when everything was working."
The solution to Problem #1 is to make your own manual backup occasionally, especially any time you change hardware or install a new program, and save the .reg file someplace where it will not be automatically "updated."
Problem #2 comes up only if you've been infected by a virus, or had a worm or other malware on your machine. Your antivirus program, or other antimalware utilities cannot access the backup registry copies made by System restore. A malware program can write an instruction into your registry that "installs" itself.
If the backup(s) of your registry made by System Restore are made after the instruction appears, you may remove the malware, but when you reboot System Restore may see changes to the registry, and may automatically pick up "missing instructions" from a backup. The malware gets "reinstalled" each time you reboot.
The partial solution for Problem #2 is to turn off System Restore before you remove the malware. When you turn off System Restore all the backup copies of your system setting that System Restore has made are instantly deleted. Unfortunately, frontal attempts to remove some malware may completely disable your computer, and if the System Restore backups are all you had, and they've been deleted, you could arrive at that condition known technically as USCWOAP. (Up Sh*t Creek Without A Paddle). It's not a terminal condition, but it does mean you're going to have to get "into the muck" to get out of it.
You normally should turn of System Restore, and delete all the existing backups it's made, ONLY when you've identified a specific piece of malware for which removal instructions tell you to do so. The instructions should tell you to create a manual backup of your registry, and should tell you how or direct you to instructions. With this backup, which will NOT AUTOMATICALLY be restored, you can at least go back to "operable but infected" if the malware removal breaks something. If you have a recent manual backup that you've already made for yourself (see Problem #1) you can of course use it if necessary.