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Update : I spoke too soon. External exception E06D7363 do occur and they are occurring almost every minute, which is a major disruption. Just before they appear, a message flashes in the bottom left hand corner: "Compacting <notebook>" so it appears that the exceptions are happening when trying to compact the notebook. Note: Please also see backup error below.
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I am getting this error frequently: "An error occurred while trying to backup notebook!"

I am currently on version 7.0.5 build 6385. Before this build was installed, I was also getting External Exceptions in addition to the above error. Now it's only the error.

In the backup folder, the size of the protected notebook backup is zero. Seems like the problem is with backing up protected notebook?

Jamal, can you try unprotecting it temporary and see if it will make any difference? And then use Tools > Compact Notebook.

Petko,

I get External Exception E06D7363 when unprotecting the notebook, followed by backup error: "An error occurred while trying to backup notebook." So, essentially I am not able to unprotect the notebook.

Is there a way to disable backup temporarily?

Yes, you can disable it via Tools > Options > Save & Backup > uncheck Automatically Backup Notebooks option.

If needed, there you can temporary disable the auto-compact feature too.