It will then see the disk, I set it up for backup and after leaving setup, the TC continues with amber flashing light
A persistent, flashing amber light indicates that any of the several potential conditions may require your attention:
o The base station has not yet been configured because it is new, or the reset switch has been set.
o You have selected a security configuration that is not recommended.
o One of several other conditions, such as a disconnected Ethernet cable or invalid IP address has been detected.
(ref:
http://docs.info.apple.com/article.html?artnum=305101)
If you run the AirPort Utility, it will show an amber circle on the summary page next to the area(s) causing the problem. Click on this amber circle and it should provide an explanation.