Windows never ceases to amuse users. There is a method to backup system settings, but there is also a hidden method to take a System image backup. To do this, start the Control Panel -> System and Security -> Save backup copies of your files with File History -> Windows 7 File Recovery -> Create a system image. Hook up your USB drive and tell it to create the image on a hard disk and choose the partition where you want to create the image. Note that the partition is exclusively for the image & associated Windows 8 files.
I shrunk the Windows 8 OS partition to about 120 gb and the resultant image partition was about 30 gb. You can also use CloneZilla to do the above, but it requires you to boot with a CloneZilla CD.
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