No, system restore does not delete favorites, refer the below link for reference:
System Restore: frequently asked questions: http://windows.microsoft.com/en-US/windows7/System-Restore-frequently-asked-questions
(What files are changed during a system restore?)
You may even back up favorites. Location of the Favorite: C: /Users/<User account>/favorites
Thanks and Regards:
Samhrutha G S - Microsoft Support.
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