After digging deeper I found out that CPS can only "see" local drives (PATA, SATA, SCSI, USB, Firewire etc). It can't see remote drives (NFS, CIFS) because the agent wouldn't have direct control over the filesystem like it does using a local interface. So using a NAS is out of the question when it comes to CPS, unless you have windows server 2003 SP1 installed on it.
So I was lucky enough to have a Buffalo Terastation that can hook up using usb 2.0. Its slow compared to gigabit, but at least it works :)
Brian