Welcome eddimor to the Windows 7 Forums website!
Personally, I think the Windows 7 backup application is a terrible piece of software. It only works about 50% of the time and takes forever to backup, sometimes up to 2 hours or more.
IF you have an external hard drive I would highly recommend using it along with Macrium Reflect Free to backup your system. Much easier and faster, takes about no more than 10 minutes at most.
It's too bad that Microsoft could not come up with a better backup solution than what is supplied with Windows 7. If you do use it, be sure to use DVD-RW or rewritable discs so if it hiccups on you, you won't be wasting a bunch of DVDs.
You can backup your product key and such using a free, legal application called
Token Restore.
You can download it and read the short tutorial here:
How to Backup and Restore Windows 7 Activation Status
This also saves on using up activations via the Windows Online activation method. This is perfectly legit to use as long as your product key is used on the same system it came with.