I don't think backing up the whole system is necessary. If something goes wrong, you can always reinstall your OS and applications (so long as they're backed up). If you have the installers on your disk you may wish to back them up... I put all my installers in a directory /users/<myusername>/installers so my backup catches them all.
Nearly all your data is in your home folder (you didn't specify OS 9 or X... I'm talking about the latter). If you backup /users/<yourusername> you'll get your documents, your music, your photos, everything on your desktop, your email, ...
If it's OS 9 it's a different story, but in general I'd suggest backing up all your DATA, and not worrying about stuff you can reinstall.