One of my clients was getting error 0x81000038 whenever she started the backup tool in Windows 7. She said that whatever she selected, whether internal drives or external drives, she was getting the same error. She restarted the system but to no avail.
I searched the internet for any possible solutions and got the KB981907 from Microsoft Knowledgebase. This problem occurs when the AppData key in the registry is missing or corrupt for the currently logged in user. This error is user specific so if there are 10 user accounts in one system and all of them are getting the same error 0x81000038, all of them need to fix their AppData key in the registry.
In fact there are two solutions to this problem, one is a temporary fix and the other one is the permanent one.