Cannot connect to shared Time Machine drive on Monterey

Attempting to connect to a shared Time Machine backup over the network results in the error "You do not have the necessary read, write, and append privileges on the selected network backup disk...". In addition, any attempted changes to the sharing permissions (POSIX or ACLs) are reverted immediately and do not take affect.

I have a fully updated iMac on macOS Monterey 12.3.1. On this iMac I have a new WD USB external drive attached for local Time Machine backups. I allowed Time Machine to take over and reformat the drive when first connected and therefore it is an APFS drive. Local Time Machine backups on the iMac with the external drive attached are working great as expected.

I now also want to use this external drive (I named it "TMBackup") to backup my Wife's MBA M1 over the network. Her laptop is also running a fully updated macOS Monterey 12.3.1. Her MBA has exactly the same local account names and passwords as the iMac. Her MBA is also able to successfully connect to and use read/write the shares that are established on the iMac (with the exception of the shared Time Machine disk).

To set up the Time Machine share on the iMac, while logged in as an administrative user account, I have File Sharing enabled, have added the external drive volume "TMBackup" to the Shared Folders list, and have right-clicked TMBackup, gone to "Advanced Options", and enabled the "Share as a Time Machine backup destination". This results in the permissions on the volume being:

drwxrwxr-x@  5 root  wheel  160 May 20 19:10 TMBackup
 0: group:everyone deny add_file,delete,add_subdirectory,delete_child,writeattr,writeextattr,chown

When in the Time Machine preferrences on the MBA, "TMBackup" shows up in the destination list, yet no matter what I do to try to authenticate I get the error "You do not have the necessary read, write, and append privileges on the selected network backup disk..." I get this error no matter which user account I attempt to authenticate as.

The really frustrating thing is also that all attempts to change the Share permissions on my TMBackup volume on the iMac are immediately reverted. I have tried to change the permissions of the Everyone group to "Read & Write" on the iMac, but then the change is reverted to "Read Only" immediately. The same occurs if I try to add other users to the share's Users list. The changes are reverted immediately. Due to the permissions I am also unable to create a new folder on the volume.

I have ready every reasonable article that I can find online and am unable to get shared Time Machine backups working. What am I missing?