Windows 7 built-in backup can make a full snapshot of the system partition and copy it to a remote location. Those images can be restored from the Windows setup DVD if the system doesn't start anymore.
TrueCrypt can encrypt a whole system partition and decrypt it through a bootloader. When starting the computer, the bootloader comes in and provides access to the encrypted data on disk so that Windows can work normally.
While Windows makes its backup, it can see the original data (unencrypted). When booting from another DVD, the TrueCrypt bootloader is not started and the partition remains unaccessible (encrypted).
My question is: How will Windows backup restore the unencrypted image to the encrypted partition? Does that work at all? Can the encryption layer be activated somehow before restoring the image? Is it okay with TrueCrypt if the actual partition contents is suddenly unencrypted again but the bootloader is still in place, asking for the password?
I'm fine with an unencrypted backup copy of the system. I only need encryption on the machine itself. The backup is kept in a safe location already.