Are you kidding? Backup and Restore in Vista performs the exact function you provide, and best of all it’s in VHD format so you can mount it.
Does it? Don't think so. Have you actually used Time Machine?
You have to have Vista Business or Ultimate for that feature, it’s not included in the Basic or Premium versions. Microsoft should have only had 1 version of Vista (Ultimate) if you ask me, and leave it to the users if they want to turn off Aero for performance gains etc., but since they didn’t they hurt sales and make it difficult to distinguish the features in discussions like these.