"b. If you select C
documents and settings\username\local settings\application data\microsoft\cd burning\backup.bkf as the backup destination, XP should automatically prompt you to write the file to a CD."
That's curious ORAC - any idea why this behaviour ???
If youv've got PacketCD or InCD or anything that let's you use a CD as a standard drive letter you should be OK - backed up System State to a CR-RW last night.
I prefer making direct copies to a removable HDD myself - that way they're directly usable without having to go through a backup program.