After a while I arrived at the error message in my second screen shot here. This is the product intended for the HOME user. Does this tell you enough about how to proceed? And what's with the OK? I think it's not OK but there is no other choice.
Because I work a lot with this vendor's software I know I can search their database and look for solutions. I did find KB 939218 and it is not pretty, particularly if you try to imagine the home user (mother, father, child) trying to follow it. The problem was that this KB (which was the only one which related to my symptoms) did not fix my problem.
I did find a message forum that discussed similar issues where the KB didn't help but some other steps did. I am reposting from it here -
Basically, it is reloading the WHS restore service driver. The tricky part about it is that it only exists while the restore is in progress.
So, you have to have Device Manager opened up with the System Devices section opened up and then do the restore. Early on, at about 3%, you will see the Home Server Restore driver pop up in the DM list. Right click it and uninstall it. Then cancel the ongoing restore process in the connector software. Get out of everything that needs to be closed and restart the system. When it boots again, retry the restore process and it should work - at least mine did and still is...
This forces a reload of the restore driver and is tricky becasue the restore driver is added and deleted as part of the restore process and you cannot find or see it at any other time.
This did work. Again - probably not for a happy home user.