>I renamed the area 'SystemPreferences' into 'System' but then I got lots of errors stemming from the fact the System and our Application.System are now getting confused. By placing using System; at the top and removing System.DateTime I can resolve these references, but I am wondering if it's OK to have our own namespace to be named 'System'?

System is highly generic and would probably cause situations like these. I would probably recommand to use custom or product oriented terminologies for your namespaces. In overall, even if you resolved the issues, another one who might jump in to support that project might be confused. At least, that's one thing I could see.