I'm wondering if it is possible to extract some files out of the SystemImageBackup without restoring the whole backup?
Is that the same as this? http://windows.microsoft.com/en-US/windows7/Restore-files-from-a-backup
^ That was not correct for extracting a full disk image
If that was not correct, or if it is going to be a big pain, I know what I would do, and that is make a Real image using a real backup like Acronis which you can get for free if you have a Western digital drive anywhere seen by your system. you can get WD acronis.
Backup with a real imager an image of the system partition, then recover the MS image, extract all the things you need , and then put the system back with the real imaging program. Then toss MS and start using the 3rd party stuff that works.
You can restore individual files from a win7 image.
I don't see a way to comment, but I just restored some files form my win7 backup image. I make images as a backup and lost a laptop due to disk problems. Just this week I restored some files from that backup by attaching the VHD (deep down in the backup folders, I had two one for my hidden restore volume (cannot be used) and one big one, the windows install). The big VHD needs to be opened without the readonly checkbox checked (when checked it opens as raw volume, not usable). And I had difficulties to open/attach it over the network (1GB home network), so I copied it to an esata drive, where it worked just fine. Could open it, and it was usable just as any other external drive. I even opened this VHD (made on 64b win7 ultimate) with a win7 prof.
If you have a win7 backup image laying around, try to open it this way (diskmanager, attach vhd, NOT readonly).