Dear Houman. Prof. Hou of WPI has done extensive work in use of Wavelets for System ID. You may contact him at [email protected] and mention that I have recoemended you. Overall, however, I believe Artificial Neural Networks are much more powerful for System ID. If you are interested in ANN for SI I can suggest some papers.
Genetic algorithm and neural networks, especially RBF based neural network is much better than Wavelets for system ID. What is the problem/ system you are working on? I might be able to offer more specific help.