Jim,
I would say it all depends on what your goal is. There really is no difference except that the V4 backup is encryted and only backs up the database files. (Since I haven't actually opened the encrypted backup file, I am not sure if there are other files). It most likely takes longer, because the databases are bigger. The other files in the AC folder from 3.7 are relatively small. I take it you are backing up the imported items which would be equal for both.
The only real difference besides the encryption is the one click backup because you already have the path besides the fact that you can back it up to three places plus offsite if you had that. If it were me, I would definitely take advantage of the two or three sites. If you back up to your pocket drive, it still makes sense to back up to a hard drive even if it is the same one you are using. Sure, if you crash that drive, you lose it, but you still have the other backups. It's always easier if you just need to replace a file for other reasons, to get the file directly from your computer.
But, backing up the whole folder or the databases physically as you described above works as well. The big advantage there is you have the psychological security of actually "seeing" the data.
