Peter:
It sounds to me like, during the rather extensive conversion phase, the drive is having some kind of communication failure. What I'd suggest is doing a less conversion-intensive image as discussed in this FAQ entry:
http://www.shirt-pocket.com/forums/showthread.php?t=81
That'll create a sparse image instead, and -- rather than backing up the whole kit and kaboodle every time -- it'll allow you to Smart Update the previous backup, which'll save you tons of time.
Sound reasonable?