it seems only R2 versions of W2k3 and W2k8 support folder, file level VSS backup. In regular Windows server editions only volumes could be backed up. is there any links or doc to confirm this behavior?
2008R2 edition: launch "windows server backup", Choose "custom" backup ... "select items for backup"
Windows 2008 edition: displays only volumes ....(C, D...)?
Vss has been a part of windows since windows 2003 see How Volume Shadow Copy Service Works VSS is a volume shadow copy. There is no "file level" volume shadow copy service. VSS is used by many (including microsoft) backup software solutions in order to do file level backup. In addition VSS is used to enable the previous versions feature.