The system partitions monk refers to should automatically be included in the image it's basically the new place for the boot.ini files etc that used to reside in C in xp.

if for some reason those files are missing then switch to sector by sector clone (for win 8 this should be fine as it's a smaller drive) not sure if sector by sector recovery allows you to install to a smaller drive from a larger one,a normal image recovery will so long as data amount doesn't exceed the intended drives capacity  

easeus todo backup is free for personal use

Next thing i see may be wrong & why you can't boot is whether the win 8 you now have placed on the 250gb is still pointing to the wrong drive location,so in computer management you would've had this list showing what drives & capacities & their numbering you have along with extended partitions if any

DISKS        partition & name          

---------------------------------------

disk 0:         NTFS win 7           250gb

--------------------------------------

disk 1:        NTFS win 8            120gb

--------------------------------------

since i'm more familiar with the xp boot ini i'll go with that layout & you'll get the idea of what may be happening ,to avoid confusion i've set it up to look like your setup so win 7 "default"  appears first in the list (anything BETWEEN the QUOTE MARKS ONLY )  \WINDOWS= "       here        "  can be changed to whatever you want,i also assume windows on both drives is on partition 1 & there are no recovery partitions before the OS partitions

 .....................................................................................................................................................................................................................

[boot loader]
timeout=30
default=multi(0)disk(0)rdisk(0)partition(1)\WINDOWS
[operating systems]
multi(0)disk(0)rdisk(0)partition(1)\WINDOWS="WINDOWS 7" /fastdetect
multi(0)disk(0)rdisk(1)partition(1)\WINDOWS="WINDOWS 8" /fastdetect

assuming my thoughts are correct notice the rdisk numbering above where it says "default" (below timeout) & the subsequent listings under [operating systems],what i think maybe happening is when you clone win 8 to the 250gb hdd it's still pointing to (rdisk) 1,that's no good as the BIOS is looking for rdisk 0 but it ain't there coz your boot file is wrong,changing it to rdisk 0 should solve it,the easiest method most probably is use the win 8 install disk & use the fixboot & fixmbr commands or do it manually or modify it in the backup image itself,obviously you'll need to change the win 7 boot disk order also from disk 0 to disk 1

 ......................................................................................................................................................................................................................

make sure in the win 8 boot ini that rdisk is also at 0 & not 1 in boot loader selection,basically you replicate the boot order of win 7 & apply it to win 8 & do the reverse for the win 7 boot ini,assuming win 8 still uses the same vista/win 7 boot files

[boot loader]
timeout=30
default=multi(0)disk(0)rdisk(0)partition(1)\WINDOWS

failing all this maybe send an email to yrag

It's fixed yall! Wizard1956 straightened me out after I tried Jafo's solution. Jafo had it right, but I went at it in the wrong order. Thanks Wiz!

I had to install 7 first, on the smaller drive, then blow the image to it, then once 7 was on, I was able to recover 8.

I had been trying to do 8 first, but the 7 image contained the MBR.

Thanks guys!!

You're welcome.