Working now?
I connected the drive to a different computer and left Disk Utility running over the weekend and it managed to repair some broken hard links. Not sure how long it took all up.
Time Machine is now "happily" copying files to the drive... I say "happily" because it is reporting that is has 104.9 GB to copy!! (drive is only 160GB). So it looks like the problem with writing to the drive is solved but TM is still broken in some way.
I think it is time to go back to my older TimeMachine drive...
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