You may not have enough disk space available to run System Restore. Try running the Disk Cleanup application.
Open the My Computer folder. Right-click on the C: drive and select Properties. Under the General tab, click the Disk Cleanup button.
It will start to calculate how much disk space can be recovered.
This part may take a long (long, long, long) time to complete. When it is ready it display a list of items that can be deleted along with how much space each is taking up. You can select which items you want removed and selected OK.
The first time Disk Cleanup is run, it takes forever to do the calculation, afterwards the process gets quicker depending upon the frequency in which you run the program.
Try this first, if it doesn't help try booting the computer in Safe Mode and check to see if System Restore works.
inmail, June 2006