I had the same problem you are having Andy. What I ended up doing is setting up a new file server and transfering all my "working" files over to it. That changed my backup from 2.63G to 880M. I left all the accounts, email, ibays and web content intact so the stucture was still there, just most of the meat was moved out.
With an 880M backup file Internet Explore on a Win2K box restored without a hitch so it obviously has something to do with the file size of esmithg.bak.
I tried to restore using Netscape, but it tried to put the entire backup file in memory before it uploads it to e-smith.
I know this isn't exactly the solution you were looking for, but it is a way to keep the structure of your server without starting from scratch.
Michael