I will assume you are using NTBackup (well the windows backup that comes with XP?)
It will depend on what you want to acheive.
If you are just restoring data then its pretty straight forward, however if you want to restore the Operating System then it becomes more problematic.
My general experiance on this (mainly dealing with server restores) is that its rubbish if you want to do an OS Level restore. The only proper method to do it from scratch is to perform an ASR (Automated System Recovery) backup which produces a floppy disk that will record things like you hard drive file partition/structure and list the necessary drivers required to get the restore operation running.
For my home machines, i tend to use imaging software like Symantec Ghost or PowerQuest PQDI. I build my machine with 3 partitions, 1 for the system the next two are extended partitions, 1 for data and the last one is FAT32 to store my image.
Once i have the machine installed how i want it with the bere essentials (with MS Office, My spyware stuff, recording software, etc....) i create an image of my machine (oh, i also ensure that my Outlook PST, MyDocument and IE favorites default to my data drive so i don't loose any data after a restore of the image).
If anything happens to my machine, i know i can get back to my previous image within 10 mins by booting off a floppy and restoring the image back. I have been doing this for years and years and it saves me a load of time. I tend to restore my image once every 6 months and once restored, i run all the usual updates, Microsoft, Spyware, etc... and then re-create the image again.
The Windows XP restore points are a good idea to roll your machine back to previous states.
Also, you have the boot option of Last Known Good to try and recover the system.