When you try to backup the System State backup on a critical volume on a computer running Windows Server 2008, you will get the error message. This is because of the default behavior of Windows Server 2008. It doesn't allow you to take backup of System State data on a "Critical Volume".
You can change this behavior by hacking the following registry entry:
- KEY_NAME: HKLM\SYSTEM\CurrentControlSet\Services\wbengine\SystemStateBackup
- ENTRY_NAME: AllowSSBToAnyVolume
- VALUE: (0) - Don't Allow, (1) - Allow