I strongly urge you (and everyone else) to use a disc imaging utility on a regular basis.
This is an excellent advice as a long run solution, however...
System restore is not a perfect tool, and in number of cases won't work, or won't help, but there are number of cases, where simply restoring registry to yesterday will cure some stupid mistake, we made today.
As for disk space, with today's hard drive prices, I see no reason to struggle for a free space. Either stop downloading 700 MB movies, or get bigger drive.
We still don't know any details about poster's hard drive: size, free space, TreeSize findings.