That is news to me, I always figured that there must be a correlation between the physical and any other manner of locating it. By what you have said, that bad block may well have been the cause of the error. I did not preformat the drive, because I have had problems with software not being able to install/run on such a partition, so I let TI format it as necessary.
I have read that it is possible to create a partition around bad sectors, so that they are fenced off, and can't be used, but if there is not a way to know precisely where that is, it would be impossible to deal with it in that manner. I guess that I will try the backup again, after having Windows format the partition, and see if TI will work with it.
There is other utilities designed to patch over bad sectors, but from what you have said, it sounds as though the partition would have to be formatted for them to work.