It should completely restore the drive from a recovery disk and a backup file stored on another drive or set of disks.
And I believe will restore the image on a new hard drive if it becomes necessary to replace one.
I have done this using Norton Ghost many times on several computers but I have not actually done it using Windows backup.
I don't remember how many times Ghost has saved my tail though, from either a crash or a really bad virus infiltration.
Right now I have both a Windows and Ghost backup of my C: drive and 2 boot-able recovery disks, one for each.
It's good to hear someone else mention the backup program "Ghost". I've been using it since it was first released, by an obscure little company in New Zealand in ~1997. It was all DOS in those days and up through version 2003 is was still able to be run from a single floppy disk (in DOS).
There is also Acronis True Image, which you can get for FREE, totally Legal, on a Seagate Seatools disk or a Maxtor 'Maxblast' disk.
Actually you can download either Seatools or Maxblast and use it to make your own Backup Boot CD.
But whatever program you use, it should be able to make an exact image of your HD, save it to an external media or DVD and be able to put itself on that media, making it able to boot your computer and do a full restore.
You're going to really know that I'm OLD SCHOOL when I tell you that my main OS is Windows XP-Pro, run from a FAT-32 formatted HD.
Sure I have Windows 7 Ultimate 64 too, but it's on a separate HD.
Backing up my XP drive is a piece of cake using my old reliable Ghost 2003, booting up from a floppy disk. It takes about six minutes and even with an integrity check and restore (it's my 100% Defrag) it still only takes less than 15 minutes.
I can make a quickie backup of my C drive to a second partition on the same physical drive or a more secure backup to a second HD or the ultimate backup to a bootable DVD (that takes a bit longer).
Regrettably, I've not tried the so called backup program that comes with Windows 7. I'll read this thread with interest though, to see just how that works out.
OT