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Congratulations on using Karen's Replicator – I like that program a lot.
As for Picasa Edits – they are all contained in a file called picasa.ini which is located in the same directory as the pictures which are edited. So, if Karen's Replicator is copying the entire folder, it is getting the original photo plus the Picasa edits. You are safe. The only thing that is not getting backed up this way is Album definitions – that is stored in the Picasa database located in the User Profile area of your computer.
If, for example, you get a new computer and copy all the folders from your backup to the new computer, then put Picasa on that new computer, Picasa will see the photos plus it will see the picasa.ini file with all the edit information. So, Picasa will display the edited version of the picture for you.
However, if you just go to the backup drive to grab a particular picture … the .jpg file … it will be the original without the edits. So – you're right, the safest way to keep everything is to Save your edits before backing up. Yes, it takes disk space, but disk space is pretty abundant these days. If you really need to clear space, you can delete the hidden 'Picasa Originals' folders from your C drive.
See the video #31 in the Picasa Series for more info on how Picasa handles edits.
In my opinion, the main problem of Picasa is lack of user's control where all imported data (pictures and videos) can be hold.
This data (My Pictures) mostly occupying a valuable space, so in my case, even having a big additional disk, I cann't really use it for
I opted for a more expensive solution by purchasing rather big capacity disk of 1TB and installing the operating system on this hard drive, therefore now, I'm not in short on space for all my pictures and videos.