If you cannot uncheck the disable SR entry found at System | Performance |
File System | Troubleshooting check the following:
Do you have at least 300MB of free space on the drive containing your
windows folder?
Is the *StateMgr entry still present and checked in MSConfig | Startup?
Is stmgr.exe running?  You can check this using either a process monitor
such as WinTop or TaskInfo or by using MSInfo32 (Start | Help & Support |
System Information) and checking for stmgr.exe in the section Software
Environment | Running Tasks.

If all of the above are OK then I think that the best way forward would be
to remove the _RESTORE folder and allow the state manager to rebuild the
necessary control files which have probably become corrupted. Delete the
folder as follows:
a) Boot to DOS using a floppy.  Do NOT choose "Minimal Boot" from the menu
when booting from a floppy but rather choose "Start computer with (or
without) CD-ROM support" otherwise the ATTRIB command will not be
available.
b) At the DOS A:\> prompt, type:

ATTRIB    -H   -S    -R    C:\_RESTORE
then
REN    C:\_RESTORE    OLDREST

c) Remove the floppy
d) Reboot your PC
e) Delete the folder C:\OLDREST
f) Check that an automatic system restore checkpoint was created.
g) Finally adjust the space allocated to the restore folder:
System | Performance | File System | Hard Disk and adjust the restore
slider to your preferred setting.  A  figure of 200MB is normally more
than adequate for day to day use allowing perhaps a week of checkpoints to
be available although increasing this to perhaps 400MB for a few days
during periods of large installs such Microsoft Office is advisable.

It might now be a good time to test that system restore is working
correctly. You can do this by performing the following test.
a) Create a shortcut on your desktop to a file.
b) Create a manual checkpoint
Could you create a checkpoint?
c) Delete the shortcut
d) Restore your PC to the checkpoint you created.
Was the shortcut restored?  Did you see any error messages?
e) Reboot your PC
Was the checkpoint retained?