This always happend if I trying to include the System Reserved (100 MB) Partion. It seems to be a Issue with the VSS because I have a (timly) related error with code 8194 (Access denied).
I had seen that error on occasion with the last beta version, but not with the RC. In those cases, I found that rebooting the server cleared it up. In my case, I only back up the system reserved and C: drive. My backup disk had >200GB
free when the errors occurred.
I am encountering this same issue with the RTM version. I have a Windows 7 Ultimate 64bit workstation, and the backup always fails if I include the SRD volume. I tried changing ownership of that volume and all files to my user and administrators,
neither seemed to make a difference, any chance you can give some more insight into what you did (pending you ever look at this forum again).
assaign a drive letter to the "System reserved drive" (computer management, disk management)
Take ownershop of all files in this drive and remove the driveletter, and reboot.