Vista Backup Utility

I got my Vista system last week and after loading over all of my documents
etc from my old XP based machine I did a full backup to an external hard disk
attached to a USB port. The particular external hard drive is also able to
function as a NAS device and that is how I normally have it on my home
network. So I moved it onto the network today and used backup again thinking
that the utility would detect the backup folder it created on the device and
do an incremental add. Well it didn't work. I changed the backup settings to
point to the Backup folder originally created but I keep getting message
saying that the backup folder already exists?

Can someone tell me if what I've done above is possible or do I need to keep
the hard drive on the USB for backup purposes. If OK to move drive to Network
then why am I getting the message reported.