Create a System Image or Back up Now

I want to create a system image on an external hard drive. When I go into
the Backup and Restore Windows (7) window...

In the upper left-hand corner, I have
Create a system image

If I click Create a system image, my backup location is confirmed
(external hard drive), and I'm shown which drives will be backed up:
EFI System Partition
Windows (C (System)
WINRE (System)
Ok. I get it. It defaults to these (important) partitions. I can select
or de-select any partitions listed, if desired.

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In the Backup and Restore Windows (7) window, I also have

In mid-screen, under the Backup section
Back up now
Contents:
Files and libraries and personal folders for all users and system image
Schedule: Every Sunday at 7:00 PM

If I click Back up now, I assusme that I'll get both a system image and
all data folders/files will be backed up. Both will be created on the
root of the external hard drive.

I also assume that none of the files in the backup part are individually
accessible. Is this correct?

If a both a new system image is done every Sunday, it could be that
Saturday night, the OS got corrupted, and Sunday's system image is
kaput.It seems to me that one would not necessarily want to do automatic
create system images. I haven't gone through all the windows yet, but is
it possible to make just folder/file backups, without making a system
image, by using file history? These files would be individually
accessible?

I've read many articles on this subject, but still have these questions.

TIA