Use a 2008 SSMS to connect to the 2005 instance and looked at activity monitor and saw a stuck backup process. Issued the kill command on it as I...

I have tried to do a manual backup using standard tsql commands and when I try this it just sits and acts like it is processing but does nothing. ...

Yes there is ample space, some 89 gigs of free space for what would be a 2 gig backup file.

Thanks so much for the input, I will look into the route you suggested as it does sound very interesting to me.