Edward Casati blogs about the Windows Home Server Power Pack 1 (PP1) server backup feature and finds it lacking for what I feel are very valid reasons. I'd add, too, that server backup is really, really slow. I'm unclear why a server-to-USB storage backup would run slower than a manual backup over my home network, but it does. I'll be discussing this on today's podcast:

The recent release of “Power Pack 1″ (PP1) adds some basic functionality in terms of backing up the Server. The feature is very welcome, and will provide simple backup capability to a majority of the target WHS market. As I will discuss later, the PP1 backup is also very limited in scope and versatility, and is a prime candidate for a third-party backup package replacement.

Fortunately there are third party backup packages that work with WHS (actually with Windows Server 2003) and overcome all of the above limitations. One of them is the Server edition of Backup Genie, which I will be discussing in a future blog posting.

Something to look into. But I agree with Edward: server backup is a great and even necessary feature, but it could be way better.