System Restore from Time Machine not working

Background

1. 18 month old MacBook with middle spec + long term Time Capsule User

2. Colored wheel of death started appearing and freezing/crashing apps - especially Word & Firefox.

3. Tried reinstalling apps, creating new users, copying Prefs etc, but no joy

4. Reboot from CD, follow prompts to Restore from TM back-up

5. Restore starts, but after about 25% shows "Can't restore all files" (or words to that effect - I don't have the m/c in front of me)

6. Re-tried again with same TM instance, and with a different instance but with same result.

Questions:

A. Is there anything else I should try from a System Restore point-of-view?

B. If I need to go for the "nuclear option" of wiping my hard drive and re-installing Leopard from the disk, how do I do that?