I use the built in windows backup, is nice and easy to setup. Does the job. I create a system image and then do incremental updates.
yes you can restore with the images. Using a windows 7 restore disc. You can create the windows restore boot disk from within the backup util.
If I remember this correctly the System Repair Disk will boot your computer and let you access your system image which is saved elsewhere.
I.e. on an external hard drive.
You still need to create the backup separately but the System Restore Disk will let you restore a computer that's unbootable.
Mike