@mikiep: thank you for your reaction and confirming it should work on internal HDs too.
In the mean time I have spent some hours experimenting and I think I have it all working now, although differently from my initial set-up.
Hopefully to help others in the future having similar problems:
First I switched off the daily system image backup in Windows 7 Recovery and I also turned off File History. Then I deleted the .edb and .xml files in C:\Users\<user name>\AppData\Local\Microsoft\Windows\FileHistory\Configuration
After I included my photos folder in the Picture Library once more and switching on File History now using USB connected external HD K:, everything seemed to be working, despite the fact that the photo reparse point was included in the Library! No more errors in Event Viewer. So far so good.
For the daily system image I created another solution, to avoid using Windows 7 Recovery.
In Task Scheduler I created a new task 'WindowsImageBackup' to be run daily with highest privileges.
The Action is
In C:\Program Files (x86)\Backup I created the following WindowsImageBackup.vbs file *):
cscript "C:\Program Files (x86)\Backup\WindowsImageBackup.vbs"
As you can see, the WindowsImageBackup.vbs runs the WindowsImageBackup.bat that contains:
datetoday = now
strMonth = Right("0" & Month(datetoday) ,2)
strDay = Right("0" & Day(datetoday) ,2)
datetoday = strDay & "-" & strMonth & "-" & YEAR(datetoday)
Set objShell = CreateObject("wscript.shell")
objShell.Run "%COMSPEC% /k C:\Progra~2\Backup\WindowsImageBackup.bat" & " " & datetoday
In other words, after the daily system image backup, the folder is automatically renamed with today's date attached at the end. That solves my other problem of not being able to have multiple copies. (Thanks Shawn!).
wbadmin start backup -allcritical -backuptarget:d: -vsscopy -quiet
rename WindowsImageBackup "WindowsImageBackup "%1
Everything seems to be working fine now, both File History and the daily system image backup. It took me a while to find the correct way to make an system image from the command line. If you bing/google "wbadmin start backup -allcritical -backuptarget:d: -vsscopy -quiet" (with quotes) you will only get German sites but it is working non the less.
*) You may want to reorder the datetoday string if you want another date format than dd-mm-yyyy.