I have an iMac with which I use a hard-drive-connected Airport Extreme to do backups via Time Machine. This has worked flawlessly for two years. I am not sure if it is a coincidence or not, but shortly after updating to Lion, I started getting dialog boxes saying the backup failed. I could not figure out the problem and ended up just plugging the drive directly into my computer, erasing and re-formatting the partition and starting over. I had Time Machine make the initial back-up whilst the drive was still connected via USB to my desktop and it worked without issue. After that completed, I moved the drive back to the Airport and, upon the first attempt at a follow-up backup, got the message: "The backup disk image /Volumes/iMac Time Machine/Living Room iMac.sparsebundle could not be created (error 1)." I am not sure what to do at this point. Any suggestions?