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If some expert can confirm that the sequence of loading NASLite is as follows:
System boots from CD - details about setup entered at this point (IP address etc.) - NASLite then writes this info to blank floppy - A reboot then restarts the NASLite process, where it now reads the info on the floppy and applies that to the current setup - System is now up and running.
Assuming you are talking about NASLite-2 CDD or NASLite+ (this is the wrong forum), then that is correct.
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Another thought "what happens when the back up falls over", should I have a backup of the backup? Or a big collection of DVD's?
Well, a backup usually implies that you have an original, so if the backup fails then you make another one from the original. If however your "backup" is your only copy, then that is not really a backup but an original in which case it may be prudent to have a backup.
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One more thought and question..... If I take one of my HD's out of the NAS box and add it to another computer running some flavour of LINUX will it be picked up and be accessible and readable by the LINUX box?
You may have to manually mount the drive but yes. The only thing to watch will be permissions.