I found the answer eventually, hidden away in the middle of a microsoft forum where it was not the actual answer, but seemed to help me.
It seems, that Windows Backup bases a system drive on criteria that include "any drive where a service is launched from".
I recently upgraded Nitro PDF reader which put a service in it. That was in my F:\progs directory. This made Windows Backup think that my F drive was a system drive. GRRRRRRRR.
(You could ask, why I would have a folder called progs somewhere separate from my system drive, but its usually portable stuff or things I don't want for very long).
I hope this helps someone else - save them from hours of searching if nothing else.
Thank you VERY much for your help derekimo and Brink