This works for me, are you sure the directory is correct?
backup database master to disk = 'c:\Test Me\master.bak' Processed 41728 pages for database 'master', file 'master' on file 1. Processed 5 pages for database 'master', file 'mastlog' on file 1. BACKUP DATABASE successfully processed 41733 pages in 22.911 seconds (14.230 MB/sec).
copy and paste this into explorer and see if you can get there C:\Documents and Settings\daultrd\My Documents\DatabaseBackups
This, of course, must be the same machine, otherwise you need to map the drive to a location or use UNC paths
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