Hi,
Windows 7 Backup and Restore did not allow USB flash drives to be used for System Image back up. Windows 7 File Recovery, in Windows 8, works the same way that Windows 7 Backup and Restore does. We recommend you to create the system Image in an external hard disk or a separate partition in the internal hard disk.
Saving a System Image in a USB drive is not recommended. The size of the System Image could be bigger than the size of the USB drive and since the drive size is usually small, it tends to fill up quickly, especially when creating the System Images is scheduled to occur at a particular time.
Please get back to us with the status of the issue.