The way I solved this "volume could not be found error" is the following:

I use a seagate external drive 150GB (SEA_DISC) for my time machine backups. I originally formatted the original partition on that drive to be Mac OS Extended (Journaled) but time machine would not recognise it. I then went into Disk Utility, selected that drive, went to partition, changed it to 2 partition, then immediately back to 1 partition which then allowed me to click on partition options where I then changed it to GUID partition type, clicked apply and voila, Time Machine could see the drive. I don't think Time Machine likes MBR partitions. Hope this helps you.

My system: iATKOS 5i (10.5.5), Intel Core i7