1. Download unyaffs along with the cygwin1.dll
2. Extract the files to a new folder.
3. Copy the system.img file from the ROM or your Nandroid backup to the folder you extracted unyaffs.exe and cygwin1.dll to.
4. Open a command prompt and cd to the folder containing the three files. If you are on Windows 7 you can just navigate there with Windows Explorer and in the URL bar type cmd to open a comman prompt in that location.
5. Type unyaffs system.img
You have now extracted all the files from the system partition of your Nandroid backup. The APKs are in the /app folder and some apps require library files that can be found in the /lib folder. For example: Swype.apk requires that libSwypeCore.so be in the lib folder for it to work properly.