I was going to write and write about this myself at some point, but I happened upon this link http://www.techhead.co.uk/disk-based-de-duplicated-backup-for-your-test-lab-with-windows-home-server which just saved me lots of time and is more thorough than I was planning on being. Thanks dude!
Windows Home Server Backups
June 12th, 2010 | Home, Technical