Your "M:\" backup seems to be the database backups of the pub, priv and dir.edb's. I've don't remember ever seeing it break the backup out into a virtual drive, but again, it's been a while.
Of the three backups to cut out of that rotation, I DEFINITELY wouldn't suggest canceling the database backups. Of the three backups, the online database backups are the most important. If your server dies, or something happens to Exchange, that's the only backup that's really going to mean anything when you're trying to get your data back. Brick-level backups are nice, and sometimes necessary depending on what you're doing and the expectations held for your position, but at the end of the day, they're not going to do you much good if Exchange gets hosed.
Personally, I'd at least add tapes to your rotation to be able to get the backups you really do need, or look at a different tape technology if it absolutely has to fit on a single tape.
Do you only have one Exchange server you're backing up? How many mailboxes are you looking at? What is your current technology you're using to conduct your backups? What kind of window do you have to work with? What kind of budget do you (or your bosses) have to work with? All these are questions that will help guide you to what you need to be looking at to be sure you're able to provide the kind of backup services (in both DR circumstances and your everyday user deletion of data cases) that your site requires.
