This behavior is by design.
Note On page 15 of the accompanying "Getting Started" page in the
Microsoft Windows 2000 Server book, Under "New Storage, Security, and Compatibility Features" the passage reads:
Windows Backup. New Backup and Restore wizards make data protection easier and more reliable. You can now use Windows Backup with a wide variety of storage devices, including tape drives, removable disks, recordable CDs, logical drives, and network drives.
As stated previously in the "Cause" section, Windows does not support the use of recordable CDs as a backup media type.