From Bleeping Computer. "
Deleting Restore Points
There are three known safe ways to delete restore points stored on your computer. These ways are described below:
Disk Cleanup - Launch the Disk Cleanup tool and then select the more options tab. On this tab you will find a section for System Restore. If you press the Clean Up button for that section, Windows will delete all restore points except for the most recent one.
Turn off System Restore - Just by turning off System Restore all your restore points will be deleted. Unless you want this to happen, be careful that you don't mistakenly delete all your restore points by disabling system restore.
System Restore runs out of storage space - If system restore runs out of the storage space that has been allocated towards its use, it will delete the oldest restore point in order to create space for the new restore point.
Problems with System Restore
There are some problems associated with System Restore when it comes to viruses. When restore points are created they are stored in a directory that is accessible only to the System account and not to a user. This keeps the restore points safe from misuse and tampering. Unfortunately this also means that any virus scan software you may have installed can not scan the files located there as well. This causes a problem if a file that is infected with a virus gets backed up into a restore point because now the anti-virus software can not clean it. Now if you ever restore from a restore point, that file that is infected will be introduced back into your system.
With this in mind, if you find that you are infected with a virus, hijacker, or spyware and want to make sure you do not get reinfected if you restore a restore point, you should turn System Restore off and then back on again to clear all the restore points. This will guarantee that their are no infected files that could be restored."