Doing just an incremental backup of your domain controller will not be enough. You will want to take the time to read the following TechNet articles to understand how Active Directory backup and restore works.
While the idea of using those older versions of Windows Server may seem laughable, the articles still contain some helpful concepts about how the backups work and some best practices for implementing them.
The next problem that you need to address is the fact that you are saving backups to a local disk. If your server ever dies, if the office ever experiences fire or water damage, or if someone decides to steal your server--your backup is useless.
At the very least, you will want to save backups to a series of external drives that are rotated and taken off-site each day. This will save you if anything ever happens to the office and you actually need to restore data. Another option that you could consider is using a cloud storage provider, such as Jungledisk or Amazon to host your backups, although these options may be less ideal for a domain controller.
Finally--find a way to test that your backups actually work! I heard a story recently from a guy who was doing everything right: he was backing up to tape on a nightly basis, rotating each night's tape, and keeping the nightly backups in his safe at home. He was covered, and confidently reached for his backup tape on the day that disaster finally struck. That was the day that he realized (too late) that his safe used a magnetic lock on its door, which was erasing the tapes every time he put them in!
Good luck. :)