How to disable Time Machine from backing up to hard drive

Mountain Lion (OSX 10.8) will not install onto iMac (under OSX 10.7.4) because: "hard drive is Time Machime backup disk" error message. However, TM Preferences does not show the iMac HD as a TM backup Location Option - it only shows the LaCie External Drive - which has been the storage drive receiving the Time Machine Backup. How do I remove/prevent Time Machine from looking for and/or backing up to the iMac Hard Drive if the TM Pref does not list the iMac Hard Drive as an option? Note: The iMac HD icon on the desktop is a "Time Machine image" (blue Drive icon w/white white counter clockwise arrow). Thanks.