Backup fails because of not enough room on destination sparseimage file???

[dnanian]

The image is, indeed, sized based on the original drive. And, in this case, you can see that's right. There only seems to be 14GB or so available on the drive. If you're trying to copy even slightly more than that (and it seems like you are), it won't work... that makes sense, doesn't it?

You can certainly update the image outside SD -- it's a drive, and you can do what you'd like to it.

Why would you want it to be larger than the source? (You can do this by manually creating the image and pointing us to it.)