Windows Backup taking waaaaay to long

If I understand correctly, the backup itself still completes, but its duration suddenly increased dramatically, and at the same time you noticed a temporary Disk 2 matching the size of the system volume.

I would not assume that Disk 2 is the cause yet. Windows Server Backup uses VSS/block-level backup mechanisms, and temporary disk/snapshot-related objects can appear during backup processing. The first step is identifying exactly what Windows is presenting.

While the backup is running, check:

wbadmin get status

Get-Disk |

Format-Table Number,FriendlyName,SerialNumber,BusType,OperationalStatus,Size

vssadmin list writers

Then check Event Viewer → Applications and Services Logs → Microsoft → Windows → Backup → Operational and the Application log for VSS events. wbadmin get status is specifically intended to show the state of a currently running backup.

I would also perform a large sequential file-copy test from the VM to the passed-through USB disk. If that is also extremely slow, investigate the USB disk, cable/controller, host storage latency and disk health. If normal writes are fast but only Windows Server Backup is slow, concentrate on VSS and the backup logs.

So: Disk 2 may be related to the backup process, but its presence alone doesn't explain the slowdown. Identify the disk first and determine whether the bottleneck is storage I/O or Windows Server Backup/VSS.