Old WD 1TB backup drive died. Trying to install new WD My Passport for Mac - Won't let me!!

Try starting that Mac in "Safe Mode" and using Disk Utility to erase the external disk while in that mode:

Use safe mode on your Mac - Apple Support

That will obviate any effect the Western Digital software may be having on an inability to use Disk Utility to erase the drive. Try it.

For reference: Disk Utility User Guide for Mac - Apple Support

and

Backup disks you can use with Time Machine - Apple Support

It's not supposed to be this difficult. Having said that I am aware of a few very rare cases in which Disk Utility was unable to format a drive that had been altered with some Western Digital junk. That's not to impugn WD since Seagate is also fond of bundling equally useless junk with their hard disk drives. The first thing anyone should do with a brand new external hard disk drive is to erase it with Disk Utility.

Edit: Come to think of it if you used some WD utility to encrypt the external disk you would need to use that utility to decrypt it. It is not clear to me whether that was a factor or not. In any event it's another reason not to use those third party things.

The worst possible outcome might be that you have to return the drive to Best Buy, because if you can't erase it it's useless to you.

So am I correct in thinking that many old backups from my old WD 1TB dead hard drive are still on the Time Machine/and in icloud?

Not exactly. If TM has not backed up for over two years most if not all the backup history that may have accumulated in local snapshots awaiting to be backed up will be gone.

iCloud is separate from and unaffected by any local storage, whether it's on the external disk or the startup disk.

I tried to erase the disk but it will not let me do this.

Using Disk Utility? It should work. What roadblock are you encountering?

I installed the WD Discovery software.

Don't do that. It may be a related factor. Uninstall it.

To confirm what you suspect, yes you need to erase the disk before you can use it with Time Machine.

There are at least two reasons to select "Encrypt Backups" when first using Time Machine.

• Should it become lost or stolen, an unencrypted Time Machine backup disk can be used to effectively create an exact duplicate of the Mac it backed up. After all, that is its purpose should the Mac become lost or stolen.
• When (not if but when) that backup disk fails due to age or any other reason, an encrypted backup disk can just be tossed in the trash. It's utterly useless to anyone without its backup password. On the other hand an unencrypted backup disk would need physically destructive techniques (industrial shredders for example) to guarantee none of its information can be retrieved.

Not everyone's Mac contains sensitive or personal information, so those reasons don't apply to everyone.