Shawn -

As you say:  It's behaving as if there was a "exclude c:\temp\...\*"
somewhere.
That will cause a directory structure to be backed up, while omitting
its contained files.

Whereas a manual 'dsmc i' causes backup of the files, but the nightly
schedule excludes and expires them, it sure sounds to me like that
schedule has been running for some time, and is still using the local
exclude options that were in place when it was started back then, with
such an Exclude being part of them.  I would use the technique
summarized in "Scheduler process, see its options" in ADSM QuickFacts
to see what that scheduler process has stuck in its mind.  Or, just
restart the scheduler.

   Richard Sims

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