Full backups take longer to do (generally a few hours), but store the PC's information in a much more comprehensive manner. You can reimage full backups when the OS can't boot as well.
The problem I had with Windows XP's System Restore was that it only partially saves my information, such that I've had cases where the computer thinks I've got a program installed (because it saved that registry info), but fails to run it because it failed to save my files for that program (which were wiped out), making re-installing a bitch because it won't re-install when it thinks it's already there, or when it can't find uninstall.exe on the file.
For my other household computers I've done an initial backup after the OS and essential programs have been installed, while I've done periodic full-backups of mine (monthly or so). I've never had to use them, so I don't know if they work.
It seems W7 comes with its own backup solution, but I have yet to try it out.