I found an easier way to do the Nandroid backup.
If you not already rooted your phone, do the very simple one-click way by downloading the Universal 1-click root found here
http://forum.xda-developers.com/showthread.php?t=753910
Also in that first post it mentions downloading
ROM Manager from the Marketplace. After installing, slide down to the bottom and you will see the "Flash Alternate Recovery". Click on that, you will see the progress bar moving as the flash takes place.
Power down then back up again while holding the down volume button and power button. You will then see the screens mentioned earlier to do your back up.