Thanks, uplink13, for your suggestion because this worked for me on an iMac 27-inch with a 256 SSD (mid-2010, i7, 2.93 GHz). Have been searching for and trying solutions for my iMac27 for a couple of days now and none of the previous solutions suggested in different forums worked in resolving the indexing issue or the Time Machine issue.
Following your suggestion, I used a separate bootable portable hard drive with the Lion 10.7.3 installer on it, I installed over 10.7.5, then updated from 10.7.3 to 10.7.4. This resolved both the indexing and TM machine issues on the iMac27. So, again, thanks for your suggestion because like so many other people who have posted here, I really heavily on Time Machine as a safety net and this issue was cutting into productive work.
On an iMac 24-inch (early 2009 model, 3.06 GHz) a different solution finally worked. Temporarily uninstalled Sophos AV, downloaded a fresh copy of the 10.7.5 combo update and reapplied it. Magically, the indexing and Time Machine issues disappeared. In the less than 90 minutes, the iMac24 re-indexed and completed a from-scratch Time Machine backup. I have no idea why this worked but if it should happen to help someone else, that's great.