It says Windows 7 because the feature is based off Win 7 code. It scares some users, but the bottom line is Windows 10 is able to recognize it correctly and there are no compatibility issues.
Can you boot straight off the HDD? No. The system image inside the backup could be used to format and install to another drive. It will install Windows just as it was when you made the backup.
Use the below link to figure out how to create a system repair disk in the event of catastrophic failure.http://www.howtogeek.com/131907/how-to-create-and-use-a-recovery-drive-or-system-repair-disc-in-windows-8/