How does DataArchiva handle restoring a record owned by a user that is now Deactived?

It will not allow the user to restore as of now. We have one CR where it will fall back to one active user-defined/setup by admin (custom settings).

What will happen to the read-only data after restore?

We convert all the read-only data into JSON format and store it in a field on that object which you are trying to restore.

How can I restore an archived record?

There is a restore button available in the application using which you can restore your archived data just by a click.