Number of Backup Sets

I ahve a Ghost 15 job setup to do a "drive backup" of my C:\ drive.  I run this manually weekly.  I can't figure out why I keep getting warning messages that I have run out of space on my external HDD which is the destination for my Ghost backup.  The job is defined as a "Drive Backup" with type of Independent recovery point.  I have the Recovery point limit set at 2, for which my external drive has enough.  However, after I've saved twice, the third time won't run due to lack of space.  I was under the impression that Ghost would automatically delete the oldest recovery point to create sufficient room for the next one.  Is this not correct?  Do I need to manually delete the oldest recovery point each time before I creat a new one?

 

Thanks.