Can't find AIRDISK

I have my AEBS up and running normally with 7.3.1. I have my 300gb seagate with a usb connection up and running and connected.
I have 10.5.2 and all updates on my 2.0ghz Core2 iMac.
I have no "shared" section in my finder window. I have set finder pref to show all items in the sidebar finder>pref>sidebar.
It shows up as connected to my AEBS with the airport utility. I double click the icon and click on the disks icon in the top menu. It is there. It is not in a shared section of a finder window, and it doesn't show up as available for time machine when looking for a drive to use.

HELP

 

It was used as a direct external before, and with system 10.5.1. It was formated then, and would show up if I cut it on. It never showed up with time machine, but I thought with the firmware update, that it would.

 

I did originally have the system firewall on, but it is turned off now. I have had it off for over 12 hours now.

 

So run disk utility>repair and afterwards to a reformat?

 

did a repair and reformat.
Then while plugged into the iMac I did a TM backup. I have connected it to the AEBS and it now shows up as a shared drive but TM doesn't recognize it as useable to do backups.

Any ideas?