I have found out that my problem is most likely the version of PGP that I am using. I had also posted this issue on a PGP form and got this information.
With most of the earlier versions of the 10.x series we had problems with backup software that uses the Windows volume shadow copy service. I'd be shocked if the Windows server did not use this service. Releases prior to 10.0.1 HF 2 and or 10.0.3 will experience
issues when used in conjunction with most backup software. The current version of PGP Desktop (10.1.1) should not be affected by this.
So it looks like this problem is just with the over 10.x versions of PGP. Unfortunately since this is my work computer I don't have the ability to upgrade this software on my own. I looks like my company is suppose to be upgrading to 10.1 within
a few months. So looks like I might have to wait a little while to verify that Windows Home Server backups will work with newer versions of PGP.