[Zubersoft]

To create a library backup file you, have to go to Settings->Backup and Restore->Backup Library. The sync library->Sync to a backup file feature is only useful for users that want to synchronize their library to a backup file from a different user so that they can merge changes into their library from that backup file. You would never use that feature to backup the library, as it doesn't work that way. There is no way to update an existing backup file right now - you always have to create a new one. Adding support for incremental backups is certainly something I would like to add, but it's not currently available.

As far as recovering your library, restoring the automatic database backup was the correct thing to do to restore the database, but now you have to replace the files. If you have all of the PDFs, I would recommend copying them into the storage location listed under Settings->Storage->Set MobileSheets Storage Location, then go to Settings->Other Settings->Fix Broken File Paths, let it run to fix the database to point to the files you copied in, and then your library should work again.

Mike