There I was, trying to make a system image the easy way (i.e., clicking “Create system image” instead of booting up in some Linux LiveCD and faffing around with programs in a command line) and Windows threw a wobbler:

There is not enough space to create the volume shadow copy on the storage location.  Make sure that, for all volumes to be backup up*, the minimum required disk space for shadow copy creation is available.  This applies to both the back up storage destination and volumes included in the back up.  Minimum requirement:  For volumes less than 500 megabytes, the minimum is 50 megabytes of free space.  For volumes more than 500 megabytes, the minimum is 320 megabytes of free space.  Recommended:  At least 1 gigabyte of free disk space on each volume if volume size is more than 1 gigabyte (0x80780119).

*- I found a typo!

I had a look at my hard drive partitions – both had at least 100GB free.  Then I remembered that Windows 7 creates a non-lettered partition of 100MB which it calls “System Reserved”.  This partition had 78MB in it, leaving only 22MB free.  The error message states that “volumes less than 500 megabytes … [need] 50 megabytes of free space”.  There was the problem!

After some searching around, I found that I needed to use fsutil to fix the problem as follows:

1. Assign a letter to the System Reserved partition (see here).
2. Open an elevated command prompt (cmd.exe, run as administrator).
3. Use the following command:
   fsutil usn deletejournal /N /D <drive>:
   where <drive> is the letter you gave in Step 1 plus the colon (e.g., F:)
4. This will free up some space in the partition.  It left mine at 48MB used, 52MB free – more than the minimum 50MB.
5. Finish off by removing the drive letter from the System Reserved partition (see Step 1 again).

Now, assuming there aren’t any other errors, the backup should run nicely!