Thank you all. I did this and it worked
1. Start -> Computer -> Right click -> Manage -> Storage -> Disk Management
2. Right click on the problematic volume (FAT32) - Right click on system (unnamed drive)
3. Select "Change Drive letters and Path"
4. Change it to your desired letter (L or any thing)
5. Right click again as in 2 and select "properties"
6. Name it as anything like "SYS" or "SYSTEM"
7. Start -> RUN command (as adminstrator)
8. type -------->> convert L: /fs:ntfs ------- where L came from 4 above
9. When asked to give the volume name, you give what was made on 6 above
10. Finally, you create system image and do the backup. It should work now