I'm not an expert at anything so here's what I think I know.
Your last question first: A system repair disk is not the same as a system image. The repair disk allows you to boot your computer so you can access various repair tools, one of which is to restore your computer using a previously made system image. If you can boot your computer normally, it's not necessary to use the repair disk to access a system image. This tutorial gives more info. System Repair Disc - Create
As far as the chkdsk /r message, that sometimes indicates a hard drive might be failing or there are too many damaged sectors on the drive for it to be used successfully. Perhaps someone with more experience will jump in, but if it was me, I'd try to create a system image using a free imaging tool like Macrium Reflect. Macrium Reflect FREE Edition - Information and download
If Macrium can't create a system image the chances are pretty good that the WD hard drive is at fault. But if the image CAN be made using Macrium, you may have some other problems related specifically to the Windows 7 imaging tool files. Perhaps they became damaged or corrupt somehow. You could run a System File Checker scan from an elevated command prompt (option two.) If problems are found run the scan 3 times rebooting in between each scan. SFC /SCANNOW Command - System File Checker
Another thought is even though you have 250GB of free space on the WD and the system image will only require 199GB, I just don't know for sure if that's enough hard drive space for a 199GB image. But if you have access to a different HD with more free space, it might make a difference. Likewise, using all the default settings in Macrium will compress the system image from 199GB down to about 125GB or so. And this compression may provide enough free space for the system image to be made. But like I said, I'm really not sure on this.