How to prepare other DCs when doing an Active Directory Authoritative Restore

basically error is saying that before proceeding with recovery operation, you should stop file replication service on other DC

Then do authoritative restore on PDC the way you are doing by selecting checkbox

After that on other DC set Burgflag registry to D2 and start file replication service

By following above steps, you are telling other DCs that pickup sysvol data from restored Dc

If you don't follow steps mentioned above, other DC will be able to replicate its sysvol data to restored DC and basically the purpose of restoring sysvol authoritatively gets defeated
U have not faced issues as of now, because you have only two DCs and sysvol must be healthy on both servers

Finally as asked by steve already, rightly, why you are restoring AD from backup when you have two DCs

you should use ntdsutil authoritative restore after initial restoration of system state backup only if you have accidently deleted any AD objects and you wanted to recover those from backups
OR
may be your DC os got corrupted, then instead of formatting entire OS and building new DC (most of the times that is wise option), you could simply restore system state backup non authoritatively so tat latest AD updates will get fetched on restored DC from other healthy up to date DC

Otherwise there is no need to restore AD from backup when you have multiple DCs unless your AD got badly corrupted and nobody is able to logon to AD. This is very rare case and that process is called as forest recovery

Please verify that to stop the FRS service, on the other DC I run the command net stop ntfrs. Then I set the registry setting to D2 (Burflags, not authoritive). Then restore the system state as I have done. Then on the other DC run net start ntfrs. I will try it this weekend.

That is the correct procedure. However...

Neither systems show SYSVOL or NETLOGON.

This may indicate a problem that won't be resolved with this procedure. Check the SYSVOL directory on the DC that you're restoring system state on. Is there anything in there? If not, this procedure won't accomplish much in terms of getting SYSVOL working again.

I created a problem by restoring (VSphere Deploy OVA) the 2 test DCs in a test environment. Neither systems show SYSVOL or NETLOGON

have you restored snapshots or restored system state

Sorry I am unable to understand what you are trying to do

What problem you are facing with AD and Do you have problem in production environment or you are talking about test environment and what problem you are trying to reproduce?