I use a similar system for personal use but I do not have it wipe all the data on each restart, instead I just wait for the system to start getting a bit sluggish or I am ready for a clean start and restore the original virtual machine. Still kind of a pain but so much better then restoring your whole system. I have been using this setup for a couple years and I have not had to reformat my main system.

For my personal use I use the same system except I do not have it start from scratch each time I just let it go till the virtual machine starts to get sluggish then I restore back to the original, still a pain each time you do it but much better then having to redo your whole system. I have been using this system for a couple years now personally and I have not had to reformat my main system since I started it.

I was in a similar situation with some of my grandparents, I eventually gave up on trying to teach them and just created a simple ubuntu virtual machine that was just a web browser, set them up using delicious for all their bookmarks and had the virtual machine not save any changes when it closed out. That way each time they start it up it is fresh like the day it was created. Took a little bit of extra work to get it all set up but this way their core machine is some what safe from their internet travels.