If your backup registry file was one which saved all branches, then import the reg file it will replace the whole of the registry. That means any changes to the registry made by program installation, etc since the registry was saved will be lost.
That effectively means any programs installed will not work.
But you say you have an extension problem. What do you mean when you say "not recognising the extension properly"? Is this just a file association problem? If so, it may be able to be fixed quite easily.
EG: If you have an extension called jpg, and when you try to open a file called somename.jpg and Microsoft Word opens up and tries to open the file but fails, it is because jpg has been associated with winword.exe. It is simple enough to re-associate jpg to be opened by IE or a graphics program.
What extension is it that you are having problems with?
If I run into problems that appear to be registry related, what problems do I encounter in importing a previously saved registry? What about software that was installed inthe meantime? Should it be uninstalled first? For example, I'm having extension problems (not recognizing the extension properly). Or is there another way to restore the extension set that came with XP in the original installation (my CD is basic, I installed S2 later). Any help or advice would be much appreciated.