Can't enable system restore

Hello,
Tony seems like you have a good knowledge of this System Restore problem so maybe you can point me to what will be my next step as I have the following issue:
- about 2 days ago the computer at the gym where I work out got infected with Virus Removal, the computer is a Dell with XP Pro and at the time had Microsoft Security Essentials installed and running
- I used Malwarebytes and Superantispyware and removed most of the pop up windows, but still noticed that in the status bar there was the icon of this spyware (Virus Removal)
- after rebooting noticed that I can't access any websites that have antivirus software, like microsoft.com or avast.com and can't update the file definitions for Malwarebytes and for Superantispyware so I installed avast (from my laptop) and did a boot scan which found still lots of infected files
- after rebooting everything works fine until after the login, than all I get is a blue screen (desktop) with no icons and no input
- if I reboot in safe mode than I get all the regular desktop icons, but can't do a system restore
- used your file from the link provided and after clicking it I still get "Registry editing had been disabled by your administrator"
- created new user, gave admin privileges than rebooted normal and after login got the same blue screen
I think the problem is that some system files are now corrupted/deleted, but maybe I'm wrong, I'm kind of out of options, is there anything else I can do before reinstalling the operating system, I would prefer not to wipe out the hard drive because they have a fitness management system program which can't be reinstalled (I have the data files)?
Tahnks,
Joseph