Same configuration as above.
Disabled personal file sharing on the imac and enabled windows file sharing. Installed sharepoints and created a SMB share for the attached USB drive. The disk image is still in place on the USB drive. Told time machine to use this drive as the backup drive.
It is now backing up, so there must be something with AFP and 10.4.x I hate to have to introduce windows style sharing to make this work but hey its better than nothing!
Just want to add that the following configuration does NOT work:
iMac 10.4.11 with WD usb drive
Usb drive is shared on the imac. Drive mounted on MacBook using AFP and the IP address of the iMac. The disk image was created using the requirements of the script provided. I also added in the .plist file with the MacBook UUID.
Time machine has stopped trying to make the sparsebundle image on the share. It mounts the Time Machine disk on the desktop of the MacBook then unmounts it quickly and says cleaning up.