Backing up iPad - 'Backup cannot be stored on this computer'

Hi all
Decided today to upgrade to iOS 4 on my iPad, running Snow Lepoard and latest version of iTunes. When I try to update it, after a few minutes, it says that the backup cannot be saved to this computer, so I cannot update it. I read that a solution to this is to delete the backup from iTunes Device Preferences.. and I have done this, but I got the same problem again. When I went back into iTunes Device Preferences, the backup is still there... i've tried deleting it many times and it just won't work 😟

Any help either deleting the backup of preferably helping to get my iPad updated is greatly appreciated 🙂