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The thing to do, from searching on the web, seems to be to go to disk utility and erase, then reinstall the OS disk, update everything and then restore from Time Machine via disk utility (restore).
Note: Had to reset the Screensaver settings.
I generally wouldn't advise using Time Machine in a situation like this where you are doing a planned migration - it does an adequate job but it does exclude some files [shiftedbits.org] which can cause some odd problems when you use it to do a system restore.
Better to use some drive cloning software like Carbon Copy Cloner [google.co.uk] or Super Duper, which will clone absolutely everything (just remember to name the new drive the same as the old one).
Time Machine, as I see it, is an excellent and powerful piece of backup software when it comes to recovering individual files or folders, and does an adequate job at recovery if you suffer a drive failure. However there are better options in situations where you have a chance to plan, such as migrating to a new machine or upgrading your system drive.