Time Machine backups broken in 10.8

I have a Mac Mini with a USB hard drive attached that serves as a network-attached Time Machine drive for my main Mac client computer. Today I have upgraded my rock-solid 10.6 home server to 10.8, hopeing they have finally ironed out the bugs in the SMB stack (that replaced Samba).

I immediately notice that Time Machine performance is very poor from the client machine (over gigabit ethernet). I googled around and apparently Apple has decided to gate Time Machine backup performance unless you purchase OS X Server via the App Store. So I purchased OS X Server via the App Store, and the performance issue is fixed.

Next I decide I want to start fresh with Time Machine backups, so I reformat the drive, and since then it won't show up in the drive list on the Time Machine preference pane (on the client machine looking to initate the backup). From what I can tell OS X Server just flat out prohibits backing up to network shares on an OS X Server. It appears you must designate a drive on the server for Time Machine backups. The server then creates a new share point 'Backups'. While this isn't as easy or as flexible as it used to be, bygones. After designating my hard drive via the Time Machine pane, I am able to choose the 'Backups' share on the client, but every time it tries to initate a backup it errors out with: The backup disk is not available.

At this point I am very frustrated. Apple has taken something that was very straightforward and twisted it into something that is more complex, more expensive, less flexible, and apparently non-functional. This seems very un-apple-like. Am I doing something wrong there? There seems very little actual information floating around about the mechanics and requirements of Time Machine on the server or client side (outside of developer reference docs about what specific AFP features are necessary for network Time Machine backups).