OK, so I tried again and noticed some of the other options while in the recovery menu. I noticed Nandroid listed... I selected Nandroid and it's doing the backup. I would guess that something is broke in the Rom Manager when it tries to initiate the backup with one click.
Maybe there is just a setting I need to change? Anyways, I have my first Nandroid backup now, which I guess should be step 1 to flashing custom ROMs?