It's possible the SR file store is corrupted. This can be corrected as
follows, go to Control Panel, open System, go to the System Restore tab,
select, "Turn off System Restore on all drives and click apply and ok.
NOTE: this will wipe out all restore points but if none of the current
restore points are working, they are useless to you anyway.
Reboot the system as directed, return to the System Restore tab as outlined
above, remove the check from "Turn off System Restore on all drives," click
apply and ok and reboot. Then try System Restore again.
If that fails to resolve it, try the following link:
Troubleshooting System Restore in Windows XP
http://support.microsoft.com/default.aspx?scid=kb;en-us;q302796