Do image backups have to restore all windows drives from same point in time?

For example, I'm moving my Steam over to another internal drive. This way when I backup my Windows C drive the backup won't be so big (and long). But even though I can always re-download the steam files it would be nice to occasionally backup the Steam directory or the drive that has this directory on it so if I do lose these files I don't have to re-load all of them.

I could occasionally do one big backup but then when I restored it I would be losing all the other backups that occurred since then so that doesn't appeal.

So lets say my C drive dies and I get a replacement (Paragon image backup program allows me to restore to different hardware). I restore my C drive (windows xp) backup that was last updated 1 hour before the c drive died and then restore my D drive backup which contains the Steam folder. But the D drive backup is one month old.

Will everything work ok (apart from the obvious fact that Steam will be less up to date than the rest of the system)?

 

Your restore image file (full backup) is excatly the copy of your C parition - you mentioned, in moment when you did this backup.
So after one month your image backup file hasn't changed - it is the same image you did month ago. If you have installed new *things* on your machine during this last month (and you did not do image backup after that) - you won't find them when you will restore your C partition from one month old image backup. There will be no also updates from WU (Windows Update) - but don't worry you will be fine with that, after restore your OS will automatically download and install all missing updates.
So... everything should work OK.