What's the big deal about the System Folder? 
System software is what makes your Mac smile when you turn it on, allows it to run, read and write hard drives, copy files, run other programs, and all sorts of other goodies. The Finder is part of the System software and is usually the program that runs first when the computer starts up. The System software lives in a folder that is usually named "System Folder," which contains the critical files "System" and "Finder," as well as many related files. In System 7 and newer versions, these related files are mostly in folders in the System Folder, such as Extensions, Control Panels, Preferences, and in 7.1 and up, Fonts.
If everyone just used the System Folder the way it comes from Apple, there would be far fewer crashes, bombs, and conflicts. But many programs add files or even folders to the System Folder, and most of us have added various system enhancements (anti-virus programs, security programs, and font management programs, such as Suitcase, FileSaver, and so on).
When your system is operating flawlessly, make a backup of your System Folder. It's easiest to do this with a backup program like Retrospect. Or you can boot from a CD or another drive, and then copy your System Folder to another disk or removable media, or use Apple's Disk Copy to save a "disk image" of the entire System Folder. If you have trouble later, you can restore that backup and get back to work. If you do this, ...