Hi, and welcome to the Forum! Also, apologies for not getting back to you sooner, I've been away for the weekend and just got back home.

I haven't had much experience using the imaging software built in to Windows 7, I actually use Acronis myself. However, my understanding is that older image files saved to an external drive will only be deleted if/when the drive is running out of space. The following is an excerpt from the imaging software help files:

"If you're saving your system images on an internal or external drive, or on CDs or DVDs, you can keep several versions of system images. On internal and external hard drives, older system images will be deleted when the drive runs out of space."

In answer to your questions (and again, to the best of my knowledge):

1) Yes you can use the external WD HDD to store as many images from as many different machines as you like... provided there is sufficient available free space.

2) Yes, Backup&Restore creates its own destination folder... called "WindowsImagesBackup". Inside that folder you will find a sub-folder named after the source machine.

3) No, there is no difference in the actual imaging process between Home Premium and Pro editions. The only variation I am aware of is that the option to save an image to a network location is not available in Home Premium.

Hope that helps,
Cheers... Jim