When running the handle program, please note that it needs an Administrator Command Prompt or the equivalent, in order to see open files of programs that are run as SYSTEM (as possibly Altaro is doing).
After searching awhile, I can find almost no information on Altaro files, but maybe their support can explain their files. Altaro VM Backup 7.0 talks about a raw data file (.altrdf?) per VM. Are your files plausibly sized? Does copying them on the Altaro system work in Windows File Explorer, or with a Command Prompt
copy? Does Duplicati run as the same user as whatever did the successful copy, or is it another (e.g. SYSTEM)?
The error message is too short to know whether you have an open file problem, a permission problem, or other. Writing to a log file would get additional information right after the warning, and maybe lots of stack trace below. Because the default –log-file-log-level is Warning, I don’t think you need it, but there are other more sensitive levels that could be used if necessary… If the problem is somehow an in-use file condition, setting –snapshot-policy would probably let Duplicati read a local file (to the extent it was present), but you said that the USB drive is remote, and I think that won’t do VSS. Is this a Windows SMB share being used?
About --> Show log --> Live --> Warning is the same log (I think) but live and reverse-chronological in GUI. Sometimes the detailed part is way off on the right hand end of the line, so just highlight it all the way over. Setting up a log file is more work but is the most likely to get you an easily copied full load of information… The easiest way to add --log-file is to Edit the backup and put it on screen 5 Options, in Advanced options, however feel free to start by clicking your way to a live log at the top of this paragraph to see if it’s enough. This can use a different browser tab if you like, and can even be set up before actually starting the backup.