A ghost copy of your hard drive is also a good start, but, if you install lots of updates & other software you can loose all this by reverting back to the ghost copy...but at least you have a re-starting point.
Another way is to use
RyanVM updates. Make your own service pack updated DVDs that also has updated packs from MS. You can also fit on other software you may need.
But again, this is not a backup of your system it just allows you to go back to a re-start point. The good thing with RyanVM is that you can add on update packs and re-make your install DVD every few months to keep it updated.
Personally. I backup software to a 2nd secure HDD that is in another computer and make updated install DVDs every 6 months or so, like the RyanVM ones. This way if it all goes south I can do a fresh install and loose only some MS updates then re-install all the other software from the other HDD.
It's not perfect but it has saved me on a few occasions.