Yes, it does grow back... somewhat.
You're not going to go from bald to having a full head of hair again. After time, DHT does indeed kill off the hair follicles, and after that, there's no recovering them.
With that said, though, having been on HRT + Finasteride + Rogaine intermittently + Dutasteride intermittently for 7 months now, the half-bald spot in the back of my head has now completely filled in, and I have a TON of hairs growing back along my front hairline. And yes, it did start out as peach fuzz. After about 2 months, I had peach fuzz all over. After about another 2 months, near the very edges of the hairline, some of that peach fuzz became longer peach fuzz. At about 6 months, I noticed that a lot of that longer peach fuzz had started becoming normal-colored normal-growing hair. (Again, mainly just along the very edges, so it blends in to the hair that's already there. It's not like there's an entire patch of hairs regrowing... it slowly works its way back up.) And the process is still ongoing.
The general rule of thumb, as I've heard it, is that you can usually reverse about 5-7 years worth of hair loss on HRT.