David,
It is advised to make sure the
System State is backed up to the root of C: prior to BESR creating the Baseline Backup of the entire machine. This should be done at least when a Baseline Image is created, but not necessarily when Incrementals are created. If System State is done weekly, it is unlikely to experience tombstone issues.
With Windows 2000 SBS (or AD machines) it is required that the System State backup be completed in the steps of the backup. If Recovery is necessary, it may not ask for the System State file. However, It is much better to have and not need, rather than need and not have.
Cheers,
Rich L