Well after a bit luck I have found a solution that was quite simple. I tried this once before but did not save (overwrite) the new selection - it worked perfectly this time:

Use NTbackup to remove Recovery Storage Group reference from the backup selection script.


a. Start -> Run -> NTBackup -> Advanced Mode -> Backup tab -> Job -> Load Selections.

b. Select Small Business Backup Script.bks

c. Click OK on the error message:
"Some invalid selections found in C:\Program Files\Microsoft Windows Small
Business Server\Backup\Small Business Backup Script.bks".

d. Job -> Save Selections (overwrite --> Small Business Backup Script.bks)

Who knows, have to try it on offending client's box soon.