I use a tool called Drive Snapshot (www.drivesnapshot.de/en/)
It has the somewhat unique property that it doesn't do sequences of incremental backups but rather what they call differential backups. The difference is that each of these starts from the same base backup. Since in most instances there is a good discrimination between the files on a hard drive that practically never change and the ones that change all the time this approach doesn't use that muchmore space than the sequences of incremental backups. The difference is that to restore from incremental backups you need an unbroken sequence of backup files, whereas with the differential approach you need the files of the base backup and one differential backup - usually the most recent.
Since there is no mechanism in place in Windows file systems to maintain a change history of a file there is also no natural way for backup tools to do so. I can think of two ways around this problem. One involves storing information in a version control system, such as CVS. The other is to keep the various backup snapshots that you make over time and ensure that you can restore from older snapshots as well.
Obviously, any changes you made and changed again between two snapshots will not be recorded (for that, see CVS above.) and thus can't be restored, of course.
It helps that Drive Snapshot - and other tools as well, I would imagine - can access an image file (base or differential) with a file system driver so that it can be mounted as a temporary virtual drive, so that you can easily retrieve individual files from any backup.
My requrements are apparently similar to yours and this software has worked very well for me.
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