Hello Ceetee.
Thank you for your question. I will be happy to answer your questions.
I understand your RPO requirements as 1 week, and that you are looking for the optimal solution to configure everything properly.
1. What type of backup to perform: file or image? I would say that in most cases, the most efficient way is to run both file and Image-based backups. File backup is mostly recommended for the data partitions (all, except the entire C:\ partition). You can also cover user data folders with File Backup (i.e., C:\Users\*) folders. The image-based backup covers the entire OS with all applications, so you can restore your computer to bare metal, so it's usually not recommended to run on any other partitions. This PDF with basic backup strategies may be useful for your question as well:
https://www.msp360.com/download/basic-backup-strategies.pdf.
2. What type of cycle to use? Full backups usually take the majority of the storage space (both local and cloud). So it's definitely a good idea to run Incremental backups. The better question here will be - how often to run the backups. I would suggest running daily incremental backups and weekly or bi-weekly Full backups. But it also depends on your requirements for the retention policy (your last question). I would suggest having at least 1 month of retention. You've mentioned that you'd like to protect against some physical issues on the computer; however, such a configuration can also help you being a last resort in case of accidental file deletion (human factor), or even a cyber threat. If the storage space is quite limited, you can store the backups for 2 weeks. I usually don't recommend storing backups for a shorter period of time.
Here you can play with a retention policy simulator, to see how many restore points you may have with your backup plan, so you can also plan it accordingly:
https://get.msp360.com/backup-simulator.
3. What storage level to use? This is an excellent question. I would definitely recommend following the 3-2-1-1-0 backup rule (
https://www.msp360.com/resources/blog/3-2-1-1-0-backup-rule/), so you can have both local and cloud backup. For the short retention policy, it doesn't make sense to use cold tier, since it has a minimum retention period of 30\90 days. Which means that if you store your backups for a shorter period of time and delete them before the minimum retention period on the storage, you will pay for this deleted data in any way. In other words, you will pay for backups that you don't have anymore. So if you plan to keep your backups for 2 weeks, then a hot tier may be quite a good fit. If you plan to store the backups on a cloud for more than 1 month, you can consider other storage tiers. Please check this document illustrating the differences between various cloud storage providers and their nuances that you need to keep in mind:
https://www.msp360.com/download/storage-providers-price-comparison.pdf
Please let me know if it helps or if you have any other questions. We are always happy to help.