Backup to external 1 TB external HD failed, then main HD failed, everything lost

I back up my Windows 7 religiously every 3 months using Windows Backup and keep the hard drive at another location (in case of fire at home). This time everything went wrong:

1. The first backup attempt failed. Not enough space on hard drive, supposedly.
2. I deleted previous backups from the 1 TB hard drive and started a new complete Windows backup.
3. That backup also failed (after several hours) but did not give a reason. I checked the "details" but there were really no details at all.
4. I figure a reboot might help, so I reboot my Windows 7 system (which I do every day).
5. The mouse did not work, so I rebooted again. (This happened approx. every 5th time I rebooted that drive.)
6. But this time the boot manager was not found. ?! Tried again multiple times - no luck. Hard drive is now completely dead. So now I have no hard drive AND NO BACKUP.
7. Husband (IT professional) tries everything to access the hard drive. No choice but to RMA, he says. He gets me a new hard drive and installs a new Windows 7 system similar to my old one.
8. So we connected the external hard drive just to see what's on it. Content:
   • A MyName-PC"file" from the day I tried making this last backup.
   • WindowsImageBackup folder from Jan. 2012
   • MediaID.bin from Jan. 2012
9. So I double-click MyName-PC and get the Windows Backup dialog that asks, "Do you want to restore files from this backup?" Heck yes! I clickRestore files. But I get an error message: "The backup application could not start due to an internal error: (0xC0003005)." No further information.
10. So I drill down into WindowsImageBackupand there are 10 XML files in there with long names, plus a huge VHD file and BackupSpecs.xml.

Please, any advice what to do? I am very concerned about this. Above all my family's photos from 15 years seem to be lost, which is unacceptable.

Questions (answer any or all, please!):

1. Is there likely to be any way to restore (or get files off of) the hard drive that appears to be completely dead?
2. Can I do anything with the files (described above) on the external hard drive? Even though the backup failed (according to the error message from the dying hard drive), it did run for several hours. I apparently can't get Windows Backup to restore them, but is there any other way?
3. There were previous backups on the external hard drive. I deleted those right before starting the new backup. The hard drive properties say that 351 GB is used out of 1 TB. Is it possible that some of those photos can be restored even though they were deleted?
4. Any other advice? What's my next step? (I have to get those pictures back one way or another...)

Would really appreciate any help. Thank you.