So I guess it wasn't my drive after all. I purchased a brand-new 2TB Seagate Barracuda drive today and installed it in the TC. It showed up just fine in Airport Utility (it recognized it as 1.8TB, which is good enough for me) so I erased the drive in Airport Utility per the instructions I found.
Next, I tried to set up the drive to be used for Time Machine and got the "Making backup disk available" message. After some time, I got the following message again:
"Time Machine could not complete the backup. The backup disk image "/Volumes/Myname-1/MyName'sMacBook.sparsebundle" could not be created (error -1)."
In the Time Machine preferences it's showing 2TB of 2TB available so it's clearly recognizing the drive; however, I can't seem to get past this point. What else can I try? I know that I can return this drive but now that I've purchased it, I wouldn't mind keeping it for the extra space (planning on upgrading to a new MBP in the near future).
