I too have now run into the infamous Time Machine bug. Little did I know. I upgraded my 3 Macs to Leopard back around December 1. On my primary Mac Mini desktiop, I pointed Time Machine at my external 250Gb drive, which also had some large video files on it, but which was mostly otherwise empty.

Time Machine started merrily making backups. It worked fine until now. Then, it stopped, and turned itself off. Every time I'd try to turn it back on, it would ask me to designate a disk to use. No problem, I thought, and clicked on my external drive. Time Machine gave me a dialog box that said "reformat required".

What the devil? The drive had been working fine last time I tried to do anything with it. So I did the obvious things, unmounting and using Disk Utility to check and repair it. No errors found that I could see, but who knows what the system is really doing under the covers, without poking around in various system logs -- and even then, OS X is pretty obtuse and cryptic. Remounted the drive. All looked good. Test copies of files, etc. worked fine.

I went back to Time Machine and tried to enable it. Same error. Double checked that I had done everything correctly. Still no luck. So then I started searching with Google.

Lo and behold, other people were having this problem. The solution to this and a similar problem appears to be not just reformatting one's disk, but repartitioning it and making sure the GUID partition table option is selected. Wonderful. Where am I supposed to put those large video files and former backups in the mean time? Grrr! >:-(

So I bit the bullet, deleting as much as I could and and removing backups that hopefully won't be needed until well after things get re-backed up. And then repartitioned.

Sure enough, once I was done with all that, Time Machine immediately started working perfectly with no further encouragement from me.

The drive was previously partitioned for Mac OS X (10.4, admittedly), just not as a boot drive. Time Machine worked with it successfully for nearly 2 months and many gigabytes of data. Everything else in the world had no problem. All I can say is WTF?

Years ago I used to develop filesystems for a variety of Unix flavors. I can't even dream of any reason why this should make sense.