NewJokeCity

1. Mount your network drive (check step-5 if you are getting error in mounting)

2. Change the preferences by running following command (open iTerm or other shell)
defaults write com.apple.systempreferences TMShowUnsupportedNetworkVolumes 1

3. Now activate the time machine

4. You will now be able to select your network drive.

5. In case, you loose your network mount, you will need to reset the preference set in step-2, by running following command (open iTerm or other shell)
defaults write com.apple.systempreferences TMShowUnsupportedNetworkVolumes 0

For more detail, read this

Completely copied from http://smangal.wordpress.com/2007/12/10/time-machine-with-network-drive/