MacBook Air: Shared Time Machine backup error on iMac

I have recently retired my working Air Port Extreme which I used as a hub and Time Machine backup for my iMac M1 and MacBook Air M1. I heeded the warning messages I was receiving as I planned to upgrade to OS 26 Tahoe.

Now that I have upgraded on both devices I have no working back up for my MackBook Air. I have connected an external drive to my iMac (Time Machine works fine for it) and followed all the instructions to share the drive with the advanced options to enable it as a shared Time Machine drive. I have no issue seeing the drive and logging in to gain access to it. I unfortunately continue to get error messages every time I attempt to connect my MacBook Air to the drive. The selected network backup disk does not allow reading, writing and appending.

My first question, is this even a solution I can use to replace my Air Port Extreme setup that worked flawlessly for years? If this is supposed to work, what am I missing?

Both Macs are at OS 26.2 and the external drive is a G-Drive 4TB connected directly to the iMac.