I use windows 7 Backup to create a system image once a week. It is the only backup I make from my system drive C:. Scheduled backup excludes the C: drive completely to save space because the system image is enough; mounting the system image (a vhd-file) to a virtual machine as a second hard drive, I can always retrieve and extract the files / folders I need to restore. Backing it up would only mean double the space backup needs.
This way I always have a complete backup, containing absolutely everything from my system. C: drive backed up as a system image, mounted as a second HD to a virtual machine whenever I need to restore files, and normal backup from other drives.
I am very satisfied with Windows 7 Backup and Restore. Always worked perfect, never had a problem.
Kari