windows server backup and DFS replication

i am having a hard time replicating my incremental backups using DFS-R.

steps taken:

1. deploy 2008 R2 ENT. server
2. add windows server backup Feature
3. add windows File Services role with DFS
4. configured "Backup Schedule" and specify the destination as "dedicated hard disk" for better block level performance.

disk 1 representation after -

5. later i am configuring the DFS replication to grab the backup set and transport to a NAS or SAN

6. i am having issues at this stage where i need to specify the source folder

7. i am opending DFS mgmt screen and configuring "replication group"

8. at the folders to replicate screen i am getting the problem with selecting my dedicated hard drive with "permission issue"

selecting folder to replicate

i have checked my permissions and i ensured full admin access i also included everyone role but no luck

appreciate any suggestion

thanks !