HAve used the M$ Backup.. and to CD-RW drive no probs.. Check that your CD RW drive is a/ recognised by the system in the Hardware Manager b/ The correct Aspi Drivers are installed (most come with XP, some with the software disk with the CD/RW)

You are trying to make a REcovery CD for Your XP Installation.. MS BAck up is not the best for this task.
You will be best creating an image of your HDD using a utility like NOrton Ghost etc..
WARNING.. A standard XP install will require a minimum of 3 CD's .. (BTW.. That is a Prob I encountered with MS BAckup is CD Spanning)

Cheers