How do I use time machine to restore my entire computer, rather than a file? Is is possible? What is the easiest (most hassle-free) way of accomplishing this?
To recover your entire system:

1) Connect your Time Machine backup disk to your computer.

If you’re restoring your system because of a problem with your startup disk, make sure the disk has been repaired or replaced.

2) Insert your Mac OS X Install disk, and double-click the Install Mac OS X icon.

3) In the Installer, choose Utilities > Restore System from Backup.

4) In the Restore Your System dialog, click Continue.

5) Select your Time Machine backup volume.

6) Select the Time Machine backup you want to restore.

7) Follow the onscreen instructions.