Thank Brink for the prompt reply.
I have applied the registry file and also used the command line to run shadowcopy delete and shadowstorage delete, removed all system restore points and to be extra sure ran cleanup to delete any shadow copies.
The result - this restores backup to a default state but the most recent shadow copies remain. In the folder I backed up ie Users in the C directory if I right click on a file and select 'restore previous versions' the link to the deleted backup is still there.
I did do a restore backup operation pior to deleting the backup and this would have the most recent backup so this link has become the most recent shadow copy file information. Now the external drive the backup was on had no system protection set and I've deleted the mediaID.bin file.
This means that there's still some link somewhere to this deleted backup in the registry or in a system file. Could there be still be something on the external drive causing this problem? I'am sure that this is a defect in Vista/Windows 7 backup since the inablity to purge backups lost by accident or hard drive failure is a real pain.
Anyway I stop here and ask is their anything more possible to resolve this or should I let this lie?