Keith,
Thank you for the reply, I would be more inclined to your line of thought on 8.6 being able to backup Server 2003 system state as well except for the following, we have two Windows 2003 Terminal Servers, both have been in place and have been being backed up for about two years, the backup of the second terminal server is successful and this issue just started a couple of weeks ago.
My other thought was that there was possibly an update installed on the one terminal server that wasn't installed on the second, however I checked into this and both terminal servers have the same updates installed.
Any other thoughts or ideas would be greatly appreciated as I am totally stumped on this one.