One of the problems with that comes from Windows' applications' tendency to place user files willy-nilly, all over the place. It has gotten much better with XP... but a lot of legacy apps store data in the programs folder, in the HD's root directory, in odd places elsewhere. Backing up completely can be a problem.
I have some Chiropractors whose vertical solution software stores the patient files ONLY in alphabetically named multiple directories (A, B, C, AA, BB, CC, AAA..., etc.) on the C: disk's root directory. The data can't be put anywhere else and work.... but the index to the data is written to the Application's own directory in the Programs directory. If you have a backup of the data but not the index, it is a worthless backup as the software will not re-index it.
The situation described in that last paragraph makes my head hurt. You really earn your keep with situations like that.
As far as my idea goes, I meant for home users. Businesses are a totally different bucket of worms.
For whatever reason as I have stated on other threads, medical software tends to be some of the sloppiest programs on the market. They seem to be a hastily cobbled together mess that work by no small miracle, and are never more than the width of a human hair away from total collapse. These software companies probably started convulsing uncontrollably when they read the HIPPA regs. Due to some previous threads about this same topic, I will be watching out for this very thing when we do the security assessment for a medical group here in a few weeks.
I've heard that Vista is supposed to solve that problem -- it stores data in My Documents or My Application Data where it belongs, but it looks to a legacy app like the data is stored where the legacy app insists on having it.