Microsoft Data Protection Manger does not support external hard drives. You’re choices are to backup to disk and copy to external later, backup to SAN/DAS, or backup to tape drive.
From a Technet DPM FAQ:
Storage Pool Configuration
What types of storage can I use with DPM 2007?
DPM 2007 supports use of any of the following sources for server storage:
* Direct attached storage (DAS).
* Fibre Channel storage area network (SAN)
* Internet SCSI (iSCSI) storage device or SAN, providing that the iSCSI storage device has received Windows Hardware Certification.
For many small businesses a tape library or a SAN solution is out of the IT budget.The need is still exists for an off site backup. There are two options to get around this and they are:
1. There is a utility that allows you to configure an external hard drive as a tape drive. This makes DPM think the external hard drive is a tape drive. This application is called Firestreamer. Firestreamer creates a Virtual Tape Library from your external hard drives. You can download a 3 month trial of this utility here: http://www.cristalink.com
2. You can go with external e-Sata drives. DPM will not know the difference between an internal sata drive and an external e-sata drive.
NOTE: Microsoft does not support backing up to external USB drives using DPM. I am not sure if they support backing up to external e-Sata drives.
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Here is a blog post on how to script DPM 2010 offsite backup to USB drives using Firestreamer: http://theintegrity.co.uk/2010/08/data-protection-manager-2010-offsite-backup-to-usb-drives-using-firestreamer-vtl/