Ah, some backup software creates a hidden recovery partition that can only be accessed at boot time by pressing a key (like F6). I've never used the win 7 backup. It sounds like either win7 expects the restore image to be on an external or network drive or else possibly the image can't be located on the OS drive.
You said you have it in a separate partition, so I'm not sure why it can't see that as a recovery option. I'll check around when I have a little more free time and get back to you if I find anything. In the meantime, maybe someone else will have an answer for you.