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If all you want to do is create an image of your Windows install, then I recommend clonezilla. You will need another hard drive to save the image to. Now the down side of this is that it can take longer to create images as I am not sure if clonezilla will let you modify an image. You may have to create a new image every time you want to back up. Which can take awhile depending on the amount of data.
Now normally what I do for regular backups is copy and paste to both a internal drive and an external drive. Then a couple times a year I burn dvds with pictures on them and the dvds go into a fire safe.
I find doing it that way easier to manage and quicker. I don't have to worry about making an image every time I add to or modify the important files on my computer.
To give background, I use Clonezilla to grab snapshots of my home computers if I need to restore them quickly, and I use it at work frequently to image systems.
You can place the files on a DVD, but you would need two DVD drives to boot the Clonezilla disk and to mount the backup. In addition, the backup would have to be smaller than a DVD, which is unlikely. The base Windows 7 image I use at work is 16gb. Because of this, I wouldn't suggest going that route, and instead storing the backups on another computer. Clonezilla has options built into to work with files over the network. This is where it really shines.
There really aren't too many options with that much restriction. If you don't need it to be an image, you could just use a normal backup program that does it for you. That way, if the system goes completely down, you reinstall Windows, reinstall your programs, and restore user data from your backup. This also has the added benefit of not needing to restart the system to do the backup.
Completely forgot about an external drive. That would work fine.