Using a NAS as the backup destination can be hit or miss. The problem is that the file system and operating system of the NAS can differ widely between devices and OneCare has problems with some of them.
You may be able to point to the NAS by using the absolute path to the shared location instead of "searching" for it -
\\server\folder or you can try using the IP address x.x.x.x\path. Note also that the shared location on the NAS must allow all users to have full access to the location - read/write/delete/etc.
If the WD device came with its own backup software, my recommendation would be to use that software and turn off OneCare backup.
Another option, if you wish to pursue the OneCare backup, would be to create a network Share on the NAS from the Vista machine that has access to the drive, and then configure the Vista machine as your OneCare Circle Hub. Configure Centralized backup for all PCs from the hub, using the network Share defined on the Vista machine as the destination.
-steve
Microsoft MVP Windows Live / Windows Live OneCare, Live Mesh, & MS Security Essentials Forums Moderator