I cannot take credit for the any part of this solution; merely for merging and clarifying how the solutions discovered by contributors much smarter than I (namely “Pondini” – Florida and “himynameismarek”) - worked perfectly for my situation. All cudo’s to these two! I have about average or better PC skills, but am an absolute newbie with Apple. This week I got a new iMac. Having a number of home PC’s all sharing files and back up space on a Western Digital MyBookLive (“WD MBL”) 3TB network drive (NAS), naturally I wanted to use it to backup the new Mac rather than rushing out to buy an Apple Time Capsule. There are hundreds of threads on limiting size of a Time Machine (“TM”) backup, many of which required entries in “Terminal” or were devised on older versions of OSX. I’m running OSX Mountain Lion 10.8, so was concerned they may not work. The issues I wanted to resolve were: 1. Time Machine will use up all of the space on my WD MBL if left to it’s own devices. 2. The WD MBL is compatible with Mac and PC’s… which is good… but unlike a back up in Windows 7 Pro which will allow you to make backups in a mapped “share” you create yourself, Apple TM Backups will not; they end up in a hidden folder on the NAS (much like PC backups done with WD Smartware) The solutions: 1. First make sure you have the latest firmware for the WD MBL as of today it is MyBookLive 02.11.09-053. From what I’ve read Western Digital fixed the compatibility issues with 10.8 Mountain Lion just recently. 2. Next you need to start TM so that it starts to create a back up. You can stop the back up once you see files being copied. Do this before you walk thru the video tutorial by my Marek below. WD MBL will create the hidden folder you need to find for TM Backups. This folder is called “TimeMachine” but it is not visible even in the “MBL_NAME-backup” folder in Finder. 3. Open safari and type “ afp://xxx.xxx.x.xxx ” but use your own ip address of your MBL. Mine was 192.168.1.120, yours will be different. 4. It will ask how you want to connect. CHOOSE AS A GUEST even if your MBL is protected… I’m not sure why it works but it does. Then a window will come up asking which share you’d like to mount. You will see all of your own shares plus one called software and now one called “TimeMachine”. Choose that one. 5. Now in “Finder” you will see a mounted shared item called “YOUR_MBL_NAME-“ (the same as the one that is probably already there but with a dash(-) at the end). You’ll also see a new “device” in the device list called “Time Machine Backups” (If you already have watched the video tutorial by Marek, you’d know you are looking for a file called “YOUR_MACHINE_NAME.sparsebundle”. Well if you browse the folder “Backups.backupdb” in the Time Machine Backups device you won’t find it… again I don’t know why but you won’t. It resides in the hidden folder called “TimeMachine” that is now visible in the thing you just mounted in step 4) NOW watch this video tutorial http://youtu.be/Nq7mSizqUSI and follow it step by step. Issues resolved. Thank you Pondini and Marek!
Thanks I guess, but it hurts my eyes just from seeing this post. 
Sorry about that. I pasted it from a word document that looked quite nice:smileyvery-happy: … But it came out like this.
I did forget one thing. Make sure to reserve the ip address on your router for your MBL. I’m not sure why but mine got a new address over nite and the backup stopped because TM couldn’t find the drive anymore. Once I put a reserve in… All has been peachy.
