I've long run my systems with system restore turned off. I am fully aware of the potential risks in doing so, but chose to do so when a virus hid in the system restore point and was self replicating from there.

Have you ever had this happen?

I had a very nasty infection that did the same thing or at least similar. I couldn't use any restore points at all with the infected machine. I finally had to do a complete reformat and reinstall in order to fully get rid of the thing.