I did a system resotre when I got it. Everything now seems to be in order. I looked for the files in the system32 folder that spylocked uses and cannot find them.

In reading online I've seen some people saying that system restore doesn't work? Is this true?

And for the final ? I got it in wanting to play some video while using FireFox. I have a lot of Temporary Internet files of defunct websites I'd like to keep in IE, is it a possibility that spylocked corrupted these IE Temporary Internet Files?

Thanks

Sometimes it works, sometimes it doesn't. Depends on system restore itself working as intended, whether you have a clean restore point to use and the type of infection you had.

In many cases, online gaming sites are infested with a smorgasbord of malware that can lead to other sites where malware is lurking. They are an increasing source of malware which you can inadvertently download without knowledge or consent. Users visiting such sites may see innocuous-looking banner ads containing code that can launch annoying pop-up ads and even change the home page settings of your browser. Further, gaming sites can put you at risk to fraud, phishing and theft of personal data.

You should use programs like Ad-Aware, Spybot and/or SuperAntispyware to scan your system and remove anything bad they find on your system as well as weekly scans with your anti-virus.

See BC's List of Virus & Malware Resources.
See BC's Freeware Replacements For Common Commercial Apps.

Why would you want to keep links to dead websites? Part of your regular maintenance should include cleaning out Temporary Internet Files (TIF) folder.