Backup Not Working

I can no longer backup my clients using WHS and have tried almost everything I have read over the last few days to try and get it to work again with no success. The following has happend over the last week:

1. I had a hard drive fail on my home server and had to physically remove the USB drive from the server.
2. I added a new hard drive to the pool.
3. I removed the failed hard drive from the pool (after it was unplugged) and about 12 hours later everything seemed fine and all my data was accessible again.
4. The backups have not worked since.
5. I have deleted all the files in the backup folder and have re-installed the WHS clients on the PC's.
6. I have run chkdsk on the server and all its drives as well as on all the PC's.
7. I still cannot get the clients to backup.
8. The error message I receive is:
Unexpected error 0x1 from WriteFile on D:\folders\{00008086-058D-4C89-AB57-A7F909A47AB4}\I7STUDY.SYSTEMRESERVED.VolumeCluster.4096.new: Incorrect function.

I am stumped and out of ideas. My WHS has run flawlessly for 2 - 3 years with no problems. While the system seems 100% fine after the drive failure the backups will just not work and its a key feature that I rely on.

Any help would be very much appreciated.