What iTunes restore actually iPhone 4

I have a new iPhone 4 and had a small issue with the way the iPhone was making (or in this case, not making) phone calls from the Favorites tab. Apple Care suggested that I do an OS upgrade to 4.3.1.
Using iTunes I first did a sync, then a backup and then an OS upgrade. My questions are:
If I do a restore from the backup, will it also restore the iPhone to the previous OS? Or does the restore only restore the data?
If the restore only restore the data, is there some way to restore the old OS if I want to?
Thanks.
PC Windows 7