Q:

last known good configuration in windows xp

I made a malware and virus scan in my system.  As part of improving its performance.  I restart the system but then it won't boot, so I tried loading the last known good configuration. 
Will it restore all the malware that has been removed by the anti malware I used? 

A:

Generally the answer is no.  The last known good configuration reloads only the CurrentControlSet in use the last time windows started completely.  This normally is hardware drivers.  As Moshe says the only exception would be a rootkit (generally).  See http://support.microsoft.com/kb/307852 for a explanation.