I suspect this is an issue that is resolved in 3.2. When a full image is created, the file name (including path) is stored in the registry. In the log you posted, the line "VDIFF turned ON" indicates a DiffGen backup is going to happen so the full image file name is retrieved and verified for the current chain. It looks like it cannot find the full image, possibly because the destination has changed but the original path was not updated in the registry.
I suggest updating to 3.2 to see if the problem is resolved. If you don't want to upgrade, I can give you instructions to edit the registry.