That's 3 questions 😉
1. System Restore is a feature of Windows XP that sets aside a percentage of hard disk space to make periodic backup copies of recently-modified files and Windows settings. In the case that Windows has trouble booting up, it gives you the option of rolling back to the last Restore Point. One place to access it is Start->Programs->Accessories->System Tools->System Restore.
2. What EXE? The repair trick is safe, as you're replacing corrupted files with safe versions from your Windows CD. Those files are for running DOS and 16-bit Windows apps and never need to be changed unless you want to have some custom default settings for all DOS programs.
3. I've never had this problem, probably because I'm careful about not getting viruses and spyware, and also because I don't run DOS programs in Windows XP very often.