System Reserved should never have a drive letter. Remove it in Disk mgmt if it does. If it has a drive letter programs can write to it and take that empty space which is used by the SysVolInfo file when you make a Windows 7 backup image.
There is no reason to bother with removing it, but the procedure if you do is to mark Windows 7 partition Active and then run
Startup Repair - Run 3 Separate Times.
Once Windows 7 starts on it's own and holds the System Active flags in it's own partition, you can delete the SysReserved partition and recover its space using free
Partition Wizard bootable CD Resize function. Resizing on the boot sector may require running the Repairs again.