When you backup a VHD to a network share which is a local drive, it may fails with the following error:
The backup operation to \\server\b$\daily\a\ is starting.Creating a shadow copy of the volumes specified for backup...Creating a shadow copy of the volumes specified for backup...The backup of volume System(C:) could not be completed. Error: The requested operation could not be completed due to a file system limitationThe backup operation stopped before completing.In the event log, I get the following:VDS Basic Provider: Unexpected failure. Error code: 490@01010004and Backup: The backup operation that started at '?2010?-?05?-?17T20:54:42.085886000Z' has failed with following error code '2155348041' (None of the source volumes were backed up.). Please review the event details for a solution, and then rerun the backup operation once the issue is resolved.
It's not possible to specify as a Destination Folder a share that is located on the machine (Like \\LocalHost\ShareName) where you are running the backup (in this case, it's the WSB Backup). When you try this, the backup will fail just after finishing the enumeration of the files (after the snapshot creation and the Writer Initialization) and just before starting the I/O backup operation (i.e: Copying from source to destination). The reason is because we DO NOT SUPPORT opening VHDs from a LOOPBACK SMB CONNECTION.
During a normal Backup Operation, we create on the Target a VHD and we mount it. This VHD will be filled by the content of the source. When we target the backup to a VHD on the network, if the share is on a local drive, we try to make a loopback SMB. By design, this is not supported, and will not work.
You need to use either LOCAL Drive or Remote SHARED FOLDER on OTHER Server on your Network.
For by pass this kind of limitation, you can use a complete backup software for Enterprise like System Center Data Protection 2010.