Restoring a hyper-v virtual backup

We have SSR 2013 agent installed on our VMs.  The backups run fine and create normal backup images.  My question is, should the need arise to restore a virtual machine, how do we do it.  I have gone through all the options on the recovery console and when you choose a destination drive SSR wants to write the image to the entire drive.  I simply want to restore the image back to a virtual hard disk file.

Which brings me to my next question, should I be backing up the folder where the VMs are stored and just restore that way? What I mean is just take the VM file out of the image and copy it back to the server.

Any help would be appreciated.