It seems to work better just doing a file-level backup vs. do a full VM backup on this system. But, the idea of replicas is interesting, we may try that too. Much thanks!

Appreciate the suggestion. Unfortunately, this particular system controls a part of our production line 24x7, is a proprietary software application, and unable to shut down daily. Maybe once a week during a scheduled maintenance window, but we do need nightly backups of this system. I realize this is a challenge and it needs to be moved off of XP and we are working on it... Unfortunately, the original application developer is no longer in business and has been very challenging to find alternative. So we are stuck right now on XP.