File that one under the "read the thing more carefully"
If you delete the PROFILE, then YES, it will delete everything that user had created provided it was stored in the Documents and Settings hierarchy. Documents and what-not stored outside that should be unaffected.
To restore a profile you'd need to have it backed up somewhere. Restoring depends on how you backed it up, and can range from running your backup software to manually creating the user profile, then copying the backup over the top of the skeleton profile for that user and resetting permissions/changing ownership to that user.
Sorry about the first one - wasn't exactly paying attention (more caffeine is required obviously)