I've just looked at my copy of Quicken (2004) and if you click on the Backup Icon a window pops up and In the bottom of that window make sure that Disc is checked and then type in the space adjacent to it the Drive letter that you will write the backup on. ie:D:\. At the moment in mine I have A:\ in that space because I use Floppies to back up. I assume that the system will operate on that and you can then backup directly from Quicken itself.
Hope this helps