I just bought a 500gb external one touch hd and tried to set up time machine, well i get this message that says it can't "unmount" the selected drive. So I tried to use disk utility to reformat it and i get the same error
MacBook Pro 2.33Ghz,
Mac OS X (10.4.10),
Memory 2GB 667 MHz
Not sure if this will resolve your issue, but I have the same or similar external Maxtor drive. Using disk utility I formatted to Mac OS Extended (Journaled) and time machine immediately recognized the drive.
I also have a 500 GB Maxtor One Touch. The best way you can format is to go to Disk Utility and choose Partition. Then, under Volume Scheme, pick 1 partition, unless you want more, set the format for Mac OS Extended (Journaled), and under Options pick the GUID Partition Table. This will rid the drive of any PC formatting and prepare it for Time Machine.
Sometimes the OS X gets a real twist in its knickers about not dismounting HDs. One method I've used to get around this is to Restart the system - a poor work-around but it has worked for me.
I tried what you suggested with my Maxtor one touch but the disk utility is getting hung up. The disk utility also got hung up when I just tried to erase the Maxtor one touch.
This has not worked for me (my Maxtor was never formatted for PC though). I have since gotten my Maxtor erased and reformatted and now the disk is healthy but I still cannot backup using time machine. I get 1.20 MB into the process and then it craps out.
I have checked to see if I needed a firmware update or a new driver update, and now I am doing a "zero out" erase to see if that will work. Called Apple and they suggested this, but if this doesn't work I am not sure what to do.
I guess I could simply junk the maxtor and get a new drive, but the drive seems fine - I can copy stuff to it etc.