They are stored in a hidden folder called System Volume Information on the root of the C drive.
System restore can become corrupted after time, one way to keep this in check is to occasionally turn off system restore and then turn it back on, then immediately make a manual restore point, the only downside to doing this is you will lose all previous restore points.
Windows System Restore is not a perfect way to backup your system but is handy when you just want to roll back a software or Windows Update installation, and does have problems when the restore file becomes corrupted due to many restore points and other problems.
There is another method to clean out all but the most recent restore point, see method 2 in this article,
If System Restore is corrupted, I prefer the first method to insure it works properly the next time you need it.
To answer your other question, I do not know of any way to backup these restore points, but there are other methods to backup the entire hard drive, here is a free utility that can do this. http://www.macrium.com/reflectfree.asp