Let me try to answer:
1. Yes, it's the full backup that was present before conversion.
2. Yes.
3. No, it can't without processing all the files first. Since you'd have to pay that cost for every backup, rather than just the occasional out-of-space failure, it didn't seem to be worth the penalty. (It's also not a guarantee, because the drive can change during processing...)
4. At present, there's no way to place the two parts of the image process on different drives. But, it's unlikely to be significantly faster... we do have some tricks up our sleeves in v2.0, though, that should speed things up.
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--Dave Nanian
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