Are these System Volume Information files actually the Restore Points from System Restore?

Yes

Does Windows actually delete these files or just “hide” them?

Deletes them

Either way there seems to me to be some issues.

  1. If Windows truly deletes the System Volume Information when one disables it and these files are directly related to being able to do a System Restore - seems one would loose the ability to restore to all points previously available to restore to.

Correct. You will need to create new restore points.

  1. Where did the files that I moved go to if not to the Chest? If they have just been moved, then are they not still somewhere on my computer and need to be moved back so that I can disable System Restore to do a proper scan?

You didnt move any files. Files in the system volume information folder are protected by windows. All programs will be denied access to any files in the the system volume information folder. This is why the only way to remove viruses in this folder is to disable system restore.