I agree that using "Let Windows choose" results in you not knowing what is being backed up. However there is a purpose in allowing that to happen, otherwise the clever people at Microsoft would not have programmed the option in.
One good reason is that many users of a computer are not knowledgeable enough (me included) to decide exactly which files and folders to backup.
Well, if you don't know what is being backed up, how can you then be expected to know how/what to recover in case of a disaster where you need to use the backup to restore from?? Should you do (1) a "selective restore of folders/files", or (2) an "image restore" of the entire backup, or (3) what?
Best you know exactly what you're doing in any type of backup ("image" or "data"), so that you make good and appropriate use of it for a disaster recovery. The purpose of backups is to protect you in case of a disaster, so that (1) you ultimately retain a working and bootable Windows system that has full integrity, and (2) you DON'T LOSE ANY PRICELESS DATA.
As to whether ANY type of backup (i.e. "image" or "data") can be done using drive as the target that has only 16GB of capacity, well that of course depends on exactly WHAT you're backing up (i.e. "image" of one or more partitions on your hard drive(s), or "data" meaning selected folders/files from one or more partitions on your hard drive(s)). If the software product you're using (from MS built into Windows, or from some 3rd-party software vendor) provides the ability to specify exactly what your backup is to consist of, then it's up to you to complete that "job" specification.
Furthermore, some backup software products (both "image" and "data") provide for a degree of data compression in the production of the output backup dataset. So while the input partition(s) or folders/files might be one size, if they can be compressed (e.g. ZIP) then the output backup dataset will likely be smaller than the input. So you might get away with doing a backup to a 16GB drive, even though the input is larger.
Alternatively, most people simply buy a large external USB drive (say 1TB or 2TB) and use it as the "backup drive", and not worry about capacity. Ideally using a USB 3.0 external drive is much faster than doing the same backup job on a USB 2.0 external drive, but most importantly you will not have to worry about exceeding the capacity of your target output for the backups. Also, using proper backup software you can retain multiple generations of backups on that large external USB drive, adding to your "feeling of security" and flexibility should it ever be necessary to recover something from these one or more backup datasets.
My recommendation to you: do NOT use Windows backup tools, neither (1) system image, nor (2) data backup.
Instead, download and install
Macrium Reflect FREE (or, you can pay a modest amount for the non-free paid version which includes some nice additional functionality, and at the same time reward the excellent software vendor for an excellent software product). This product can do BOTH (1) "image" backups, and (2) "data" backups.
The FREE version does not do automatic "space management" (i.e. automatically "pruning" older generations older than what you specify as the maximum number of generations you wish to retain, when you run a new backup job to create a fresh new generation) so if you go with FREE you'll have to manually maintain your generational historical versions of the backup datasets. If you go non-paid, this will be done for you.
But either way, Macrium Reflect is a SUPERB and easy-to-use product for backup/restore, both for (1) "image" backups of one or more partition(s), and (2) "data" backups of selected folders/files on one or more partitions.
With "image" backups of the bootable "system reserved" and C partitions you can then RESTORE both of them in the event of a catastrophic disaster to Windows integrity that prevents it from booting, or for which you just want to return to an earlier working environment. So you might take these "image" backups weekly (and Macrium Reflect can be set up to run these jobs automatically for you on a regular scheduled basis), and retain say 5 generations just to make you feel good.
Then, you can also take "data" backups for the folders/files where you have "DATA" (e.g. the complete \Users folder on C, and possibly other folders on C or other drives where you have personal "DATA" stored). These "data" backups can be run monthly for a FULL "data" backup, and daily for an INCREMENTAL "data" backup. FULL backups are for EVERYTHING in the set of folders/files you check to get backed up. In contrast, INCREMENTAL backups are for only those folders/files which have been created/changed since the last time you ran a FULL or INCREMENTAL backup.
In other words, if you run monthly FULL and daily INCREMENTAL "data" backups, then everything you work on every day will be guaranteed backed up every night. You will never lose anything, as long as it existed by the time your nightly FULL/INCREMENTAL backup job got run. And once on that "data" backup dataset system you will always be able to recover it in case of accidental loss or deletion or corruption.
By retaining multiple complete sets (i.e. monthly FULL+INCREMENTAL sets) going back say 4-5 months, that means you will have full selective folder/file recovery for ANYTHING you ever had on your system on ANY DAY over the past 4-5 months, as long as the folder/file existed on some night during the 4-5 months when the nightly FULL/INCREMENTAL backup job got run.
In my own situation, I use [non-free] Macrium Reflect STANDARD for my automatically scheduled weekly "image" backups. Automatic "pruning" to keep no more than 5 generations of image datasets.
And I use another [non-free] software product named
NovaBACKUP Professional for my automatically scheduled monthly/daily FULL/INCREMENTAL "data" backups. Again, automatic pruning to keep no more than 4 complete monthly sets of FULL+INCREMENTAL backup datasets.
Backup is to a 2TB external USB 3.0 drive for both "image" and "data" backup datasets.
NOTE: when you take an "image" backup of C, obviously you're also backing up the same folders/files that you might also be backing up in a "data" backup including contents of C. Not a problem, and not an issue. The two different backup formats simply provide two alternative restore/recovery options, depending on the nature of your "disaster" and exactly which of your multiple recovery options is simplest, easiest, and gets you back to where you want to be. "Image" backups are easy to recover from but don't provide the selective folder/file recovery capability as would be provided through a proper "data" backup.
