CloneVDI and the MS backup tool will only create a file the size of the data on your drive that is not zeroed out. So you will want to use a util like sdelete first. If you had a big file on there but deleted it at some point the data is still there but the metadata to find it is gone. But from the POV of the clone tool there is data there.
I use it all the time to help maintain my virtual machines.
I think one of the requirements of the MS backup tool is a separate drive.
The linux commands I mentioned will copy *everything* (including empty data). You can make it copy just the partition or the whole drive.
I have done the linux command cat a few times to compress the drive too. Something like 'cat /dev/hdb > gzip -9 back.zip'
PokeMAME mentioned clonezilla. Though it looks like you have to take the computer offline to image it. I have also in the past used driveimage xml but it was rather slooow.
If all you are looking for is 'someone nuked my drive I need to put it back' and it is windows. Just stick with windows backup. Built in and free and you can keep using the computer while it is backing up. I have mine set to backup once a week. The restore stuff built into the installer recognizes it and will restore the drive. Unfortunatly it is local drives only for home edition. So I had to resort to some trickery to make it work across a network. The other downside is it will only clone the 'c' drive and nothing else. Or at least I have not found a way to make it do my other drives. It will backup the files but not clone them.