There are times where test studio throws this exception described in http://feedback.telerik.com/Project/161/Feedback/Details/121035-path-too-long-on-backup-problem

[04/24 11:48:37,Telerik.TestStudio.RemoteExecutor.exe(5092:133),TestStudio] AutomationHostState.StoreToFile() : EXCEPTION! (see below)
     Situation: AutomationHostState.StoreDomOnDisk
     Outer Exception Type: System.IO.PathTooLongException
     Message: The specified path, file name, or both are too long. The fully qualified file name must be less than 260 characters, and the directory name must be less than 248 characters.
     HRESULT: 0x800700CE (Official ID (if app.) = 2147942606, Error Bit = FAILED, Facility = FACILITY_WIN32, Code = ERROR_FILENAME_EXCED_RANGE)
     Call Stack:
          at System.IO.PathHelper.GetFullPathName()
          at System.IO.Path.NormalizePath(String path, Boolean fullCheck, Int32 maxPathLength, Boolean expandShortPaths)
          at System.IO.Path.NormalizePath(String path, Boolean fullCheck, Int32 maxPathLength)
          at System.IO.FileStream.Init(String path, FileMode mode, FileAccess access, Int32 rights, Boolean useRights, FileShare share, Int32 bufferSize, FileOptions options, SECURITY_ATTRIBUTES secAttrs, String msgPath, Boolean bFromProxy, Boolean useLongPath, Boolean checkHost)
          at System.IO.FileStream..ctor(String path, FileMode mode, FileAccess access, FileShare share, Int32 bufferSize)
          at ArtOfTest.WebAii.Design.AutomationHostState.StoreToFile(String filePath, Object value, String traceMethod)

[04/24 11:48:37,Telerik.TestStudio.RemoteExecutor.exe(5092:133),TestStudio] AutomationHostState.StoreImageBytesOnDisk() : EXCEPTION! (see below)
     Situation: AutomationHostState.StoreImageBytesOnDisk
     Outer Exception Type: System.IO.PathTooLongException
     Message: The specified path, file name, or both are too long. The fully qualified file name must be less than 260 characters, and the directory name must be less than 248 characters.
     HRESULT: 0x800700CE (Official ID (if app.) = 2147942606, Error Bit = FAILED, Facility = FACILITY_WIN32, Code = ERROR_FILENAME_EXCED_RANGE)
     Call Stack:
          at System.IO.PathHelper.GetFullPathName()
          at System.IO.Path.NormalizePath(String path, Boolean fullCheck, Int32 maxPathLength, Boolean expandShortPaths)
          at System.IO.Path.GetFullPathInternal(String path)
          at System.IO.File.InternalMove(String sourceFileName, String destFileName, Boolean checkHost)
          at ArtOfTest.WebAii.Design.AutomationHostState.StoreImageBytesOnDisk(String projectResultsPath, String fileRelativePath, String expectedImageRelativePath)

There was a MSDN blog by Kim Hamilton that suggested a possible solution to this issue.  http://blogs.msdn.com/b/bclteam/archive/2008/07/07/long-paths-in-net-part-3-of-3-redux-kim-hamilton.aspx

Please see if this exception handling is feasible.