Thus, we are not able to use TFS as of now, but I need to continue working locally on my PC. The default source control settings in VS2005 is not very useful when a connection to TFS cannot be made; it will try to check out files and then just fail, not giving any fallback options. I had to make these changes to 'Checked-in items' in the VS2005 options to be able to 1) edit files and 2) save them locally:
Note that you must clear the 'read only' attribute of a file to be able to save it. Just select the file to overwrite in the 'Save as' dialog, then use 'alt-Enter' to change the properties of the file.
The old SourceSafe 'overwrite' option popup is not available when editing and saving a file that is under source control. You need to change the TFVC options before you can edit and save the file.
The reason for trying to restore the databases is that one of the developers could not delete a test project from TFS using the TFSDeleteProject tool, and then manually deleted some records in the database. The gurus have just given up the restore activities, and are now reinstalling TFS from scratch...
The morale: don't mess with stuff that works.