I couldn't agree more, who in their right mind wants to go back to the factory installation image. The older your system is 3-6 or even longer the less use doing a factory restore is, you may well have done numerous security updates or even SP updates, not to mention application installations, updates and tweaks to settings.
Making regular Image backups (weekly) with hard disk/partition imaging software is really the way to go and keep at least the last 6 backups. Should you ever have to recover from a problem, be that system problem or virus etc. you just recover to the last image backup.
I perform a weekly backup of my system, including image onto an external HDD. I am correct in saying that i can also create a new set of Recovery Disks that if ever needed would restore my system to the exact state it is in now, with all the programs, settings, drivers etc? On previous occasions when i re-installed Windows i created a new set of recovery disks immediately after re-installation so obviously once used they would restore my system to its original 'Out if the box' state.
I suppose on the other hand i could question why that would be needed as the back up of my system the way it is now is on an external HDD and constantly being updated so even if i had to re-install Windows using the original restore disks i could then restore to the latest image afterwards. But. I would still like to know if the latest image can be saved to a DVD Boot Disk just in case the external HDD ever failed?