Hi Carol,
I'm getting out of my depth here with respect to my knowledge of sandboxie... I can only suggest that you check out the forum with respect to IE problems - haven't experienced that problem myself (what exactly is the problem? IE won't run at all/locks up/won't connect?).
As for your other concern, I can only report that when I open my webbrowser sandboxed, all of the history and settings from my last "open" or "un-sandboxed" session for that browser are available, so it must be going to the permanent installation to retrieve my settings. AFAIK, the registry is replicated in its entirety within the sandbox and then deleted when the sandbox is emptied. The folder structure within the sandbox is created as needed. So, if an app modifies files located under your user directory/application settings that folder is recreated, along with the folder structure that it sits within. Likewise, if modifications are necessary under the program files folder, that file/folder structure is mirrored as well. These changes are also recorded/made in the "virtual" registry that has been created.
I'm not sure if I've addressed/answered your questions or not... I'm not a "power user" of this application, though have successfully used it to surf the web and to test run software installations before "committing" to them...