While I agree Backblaze is overdue to exclude the sparse image, in fairness to them, no other online backup solution (other than Time Machine itself) handled it correctly either, at the time I was investigating this last year.

(I'm not even sure Apple itself handles it correctly in all cases. I had to migrate to a new macbook recently, and Migration Assistant hung while transferring my files. I deleted the sparse image, tried again, and then it worked. Possibly a coincidence, I admit, but Migration Assistant reliably disappoints me every few years.)