After I put my HD into the Spotlight privacy list, and then took it out, the indexer ran for about 9 hours and finally finished indexing my iMac HD. I then unloaded the Spotlight module with the Terminal command below, and ran Time Machine with no indexing. It backed up 5Gb in about 5 minutes. I then reenabled Spotlight with the second command below. I ejected my Time Machine volume. My iMac got busy indexing again, finished while I was composing this message.
Pretty clear that the Spotlight indexer is a problem, but at least I have a path to disable/renable Spotlight to do Time Machine backups till Apple comes up with a fix. If it gets too cumbersome I'll reinstall 10.7.4 using the installer. I've turned on my Time Machine disk again to see if it gets indexed.
Following commands are entered into Terminal and require Admin password:
Disable Spotlight: sudo launchctl unload -w /System/Library/LaunchDaemons/com.apple.metadata.mds.plist
Enable Spotlight: sudo launchctl load -w /System/Library/LaunchDaemons/com.apple.metadata.mds.plist