E00070021: Unable to create volume snapshot

Problem with backup:

Acronis Tue Image 11 Home (build 8101)
on Thinkpad T61 with XP Professional SP2, @300 GB internal (c:) drive.

BACKUP PROBLEM:
===============
When I try to do a complete backup (user and service/hidden partition)
and exclude a directory with some large (video) files the backup stops
with error

E00070021: Unable to create volume snapshot
(0x70021)

It seems I can either do a complete full backup *without* being able
to use directory/file exclusions (a major positive/wanted feature)
resulting in larger backup times and files

OR

exclude files/directories, but not backup the hidden/service
partition, thereby loosing the ability to mirror/restore the disk in
case of a complete harddrive replacement (defeats the propose of
having purchased this product).

I downloaded SnapAPISetup.msi in November when I had the problem
initially. It didn't help.

I believe this is a known problem.

I would say the product is not fully functional in this state. I
should be able to create a backup (incl. service partition) with
exclusions of non-crucial files in order to keep the backup time and
file sizes minimal.

There should be a patch that fixes this, or alternatively a free upgrade
to a product level that does. I've always recommended this product
to my students and colleagues, but this really gives me pause.

Thanks.