There are two words in this phrase which have multiple definitions. First I will point out which definitions would be understood in this case: cover - a blanket, quilt, or the like restrict - keep within certain often specified limits or selected bounds (dictionary.com) What this means idiomatically is that they remained on top of the sheets and blankets rather than getting into the bed in the normal way. It also implies that one or both of them may have wanted to go under the blanket, but the speaker prevented this from happening.

Can it mean she doesn't want to have sex?

'restricted to the top of my covers' Restricted = 제한 / 허용되지 / 금지된 i think, this is a uncommon expression. i think she meant that she really enjoyed what they did although "it is not allowed or they are not allowed to do that thing".