I was trying to perform a backup of the system C drive to another local storage D drive by using the Create a system image feature. Each time the system image was attempted, it would result in the same error:
Windows Backup encountered an error when writing data to the backup target. (0x80780166)
Additional Information:
STATUS_WAIT_1 (0x80070001)
The system image had worked many times in the past, but it was now failing. The only recent change to the system since then was upgrading the storage drive to a larger capacity and all the files had been migrated.
The solution was fairly simple. I closed the Windows Backup tool and on the storage drive that had the previous backups, I found the folder titled WindowsImageBackup (located in the root of the drive). I then renamed the folder (e.g., WindowsImageBackup-old).
When I attempted the backup again, it completed successfully. Then I deleted the renamed folder to free up space.