The cause was because I had configured VSS Shadow Copies on the VM and set these copies to be stored on another volume. If configured like this, DPM cannot back up as a Child Partition (online) and instead has to backup as a Saved State (offline). Which explains why this VM has temporarily been going offline each night for the first few minutes of the backup!
To check whether you have VSS Shadow Copies enabled, in My Computer, right click on any volume and select Configure Shadow Copies. Alternatively, open command prompt and type
select disk <enter disk number>
vssadmin list shadow storage
You have two options - either continue backing up as Saved State, or move the VSS Shadow Copies onto the same volume as it is protecting, which will allow you to back up as Child Partition. If you make any changes to Shadow Copies, you will lose your existing copies.
Note: Once any changes are made, DPM doesn't display the updated backup type for the VM. It continues to display the backup type it first used when the VM was originally added to the protection group. If you want it to display correctly, you will need to remove the VM, from the protection group and then re-add it.