OK! I gave all this a rest... when I returned I got rid of the "Saved Settings" again as you suggested, started SD and then selected the unselectable image. And you were right, I had to select the "Smart Update..." in the "During copy" options and it worked. The default threw me.
The backup seems fine and I mounted the image to make sure. In SD the "to" listing still has the greyed out "backup" and the new "backup 1". So it works but it's a little strange.
Anyway thanks for the really great support and the quick replies! It's really appreciated
