My computer has C: drive (both system and personal files) and D: drive (named Recovery). I think the D: drive just holds restore points which would be used for System Restore to an earlier date. Is that correct?
No Picablu. The D: Recovery Partition is more or less the original Window Disks on your Hard Drive. It's more common now for computers to be sold without Windows Disks, which are used to reinstall the Operating System. You do that now from a "Recovery Partition", and when used, it restores your computer back to "Factory State". There are usually two "Recovery" options.
A "Normal" recovery, and a "Destructive" recovery. The first one is supposed to restore Windows and leave all your personal data intact, although all the software you installed since getting your computer will be gone. And all the pre-installed stuff you may have taken off, will be back.
The second option completely wipes the System Drive and restores Windows, and all you will have is a computer in the same state it was when you bought it. In other words "Factory State". My experience has been to also lose all data with a "Normal" recovery. Fortunately, I had the sense to back it all up anyway.
The Macrium Reflect freeware version would place an image of the entire C: drive on the external hard drive. System Recovery would then be able to put everything back on my computer using the Macrium rescue CD. Am I understanding correctly so far?
Yes and no. You will have an "Image" of your entire System Drive minus free space and certain unnecessary files providing you choose the "Intelligent sector copy" as shown here:

You don't want an exact copy as that would include all your free space etc as mentioned above.
Also. System Recovery has nothing to do with restoring a Macrium Image. They are totally separate things.
You would restore the Image yourself simply by placing the Rescue cd in your cd/dvd drive, and then booting with it, as shown in those pictures I took.
Also please advise; will running the program monthly just record any recent changes to the image that's already on the external drive, or do I delete the image and run a whole new one?
Delete the old one and make a new one, and don't forget the MOST important thing. Make sure you select all verifying options. Verify after making the Image, and verify before you ever restore one, if circumstances allow.
The idea of messing around creating and using separate partitions scares me, so for now I think I'll stick with frequent backups of personal files on USB flash drive. I'm comfortable moving files about with that.
Whatever suits you Picablu, is what will work best for you.
Sorry if I'm turning this into "Computers 101 for Dummies" ![:D]()