Finally worked but you must go in this order
I have a Lenovo laptop with Windows 7 64-bit home premium. Windows won't boot not even in safe mode. Repair disc won't boot from CD/DVD player. I can boot from a USB drive with the Repair disc info to the System recovery options. (I have tried re-ordering the boot option in the bios - the CD drive is just not working.) I have a system image backup on the c: drive (primary HD). But when I run the System Image recovery it won't go forward, get the message: Windows needs to format the drive that the Windows Recovery Environment is currently running (not true since I booted from a separate USB.) It prompts me to create a system repair disc. Choose a different image to restore.
THEN, I attach an external HD and refresh. The restore finally works.