The problem with the zip file is caused by the iMac being too fast and efficient. It unpacks the zip and then unpacks the bin. What you have to do is let it unpack the zip file and then click on cancel before it has unpacked the bin. You will then have a bin file to use with your NAS.
I'm still using mine as a time machine. What I find is that it works fine as long as I leave my iMac on all the time. If I power my iMac off, I need to power off my LG NAS as well, otherwise it doesn't work.
So in order:
1) Power on iMac
2) Power on NAS
3) Connect to NAS as I mentioned above, using go server in finder and typing in the IP address to mount the volume
4) Select it in time machine.
Still no luck with iTunes, it recognised the NAS as an iTunes server, but then just stays busy forever.