I could be wrong about this, but my take on it is that you don't back up your system, you back up your files...
This means that you should retain all of your software disks including your Windows 7 disks, so in the event of a catastrophe, you can re-install everything.
Then your backup contains all the files you have been working on so that you can catch up on everything.
There are two other considerations:
System Restore - if you do this regularly, you can 'roll-back' everything to your last system restore point - this should give you a degree of protection for your operating system.
Disk Backup - There are several methods for mirroring your entire main hard drive (including operating system), but this can be time-consuming and labourious - If your motherboard can cope with RAID, that may be a viable option, there is a RAID setting (RAID1) that will copy everything you do onto a second disk in the background - this can then be your restore disk, however if one disk gets a virus - they probably BOTH will....
http://www.socket939.co.uk/glossary.htm#RAID
But you could start a routine where you mirror your entire disk at regular intervals - so when the worst happens, you can just take out the bad disk and replace it with your backup - I think ACRONIS might do software that will do this, you could do it by 'hand' or have it running as a regular automated task - you will need to be aware of when you are getting problems with your disk, and make sure that you don't copy faults over onto your backup.
Basically - it's a nightmare....ha ha ha..