macosxhints.com now have an easy solution to enable backup on mounted network drives with Time Machine: type the following in your Terminal:

defaults write com.apple.systempreferences TMShowUnsupportedNetworkVolumes 1

and Time Machine will let you select mounted network drives (under Set up Time Machine / Change Disk). I have no idea how reliable it is to use Time Machine with network storage and what kind of format is best. I still use a Firewire disk. Another issue is, that Time Machine will eventually fill all available disk space, no matter how many TB you have (more on this issue discussed here).