I would imagine you would have to do a clean re-install of XP (or Vista, or whatever OS you use), then use the "restore" function from Mozy.
Also, I like the Vista Business edition because of it's "complete machine" backup function. So... I back up my entire C: drive to my D: drive once a month. That would allow me to restore my Vista install to a new hard drive if my C: drive fries. It's just a simple ghosting program that comes with the higher-dollar editions of Vista.
Alternately, if I get a corrupted OS, I can restore all my files/settings/etc. from Mozy. I can also restore from Mozy onto a fresh OS install.
All in all, I think I've covered all the angles. Time will tell...