It seems to be a Finder issue rather than with the disk image driver since a simple umount /Volumes/DiskImageName makes them disappear pronto.

Update: Further, Finder also gets terribly confused in some circumstances where you mount two (different) images with the same volume info. I got into one state where there was one volume showing in the sidebar that wasn't even mounted. A swift relaunch of the Finder sorted that out...

Update 2: Seems after relaunching the finder the original issue itself went away.

Well it's not that it can't, it actually does - but it won't show you any disks that it doesn't think are local (eg. disks served by Airport Express apparently work fine), so Apple evidently have decided that my net connection isn't fast enough for backups so I'm best off not even trying :(

So let's start hacking :) The TimeMachine preference pane binary has the following methods:

@interface AppleTMPref (Private)
- (BOOL)_isSupportedNetworkMountPoint:(id)fp8;

@interface AppleTMSettings : NSObject
{
    ...
}
- (BOOL)isNetworkBackup;

@interface TMBonjourBrowser : NSObject
{
    NSNetServiceBrowser *_browser;
    NSMutableArray *_netServices;
    NSImage *_serverImage;
}

- (id)init;
- (void)dealloc;
- (id)_dictionaryFromAirPortDiskData:(id)fp8;
- (BOOL)_isLocalNetService:(id)fp8;
- (id)_volumesFromNetService:(id)fp8;
- (id)bonjourDisks;
- (void)netServiceBrowser:(id)fp8 didFindService:(id)fp12 moreComing:(BOOL)fp16;
- (void)netServiceBrowser:(id)fp8 didRemoveService:(id)fp12 moreComing:(BOOL)fp16;
- (void)netServiceDidResolveAddress:(id)fp8;
- (void)netService:(id)fp8 didNotResolve:(id)fp12;

@end

@interface SnapshotUtilities : NSObject
{
}

+ (BOOL)mountPointIsNetworkVolume:(id)fp8;

1. create an amazon web services account
2. sign up for amazon S3
3. download MacOS X S3 Browser
4. install MacFUSE Core for OSX 10.5
5. get your Amazon S3 key ID & secret (you'll get an email from Amazon with an url about that after signing up)
6. login and create an Amazon S3 bucket using the S3 Browser you downloaded (I called my bucket "12inch-timemachine" for backing up my 12" Powerbook)
7. download s3fs.cpp from the s3fs project
8. you'll need to add the following line to the top of the file somewhere:
   

   #define __off_t off_t

   (props to Roberto Saccon for figuring this out)
9. compile s3fs.cpp with the following incantation:
   
   g++ -Wall -D__FreeBSD__=10 -D_FILE_OFFSET_BITS=64 -I/usr/local/include/fuse -L/usr/local/lib -lfuse -pthread -lcurl -lcrypto `xml2-config --cflags --libs` -ggdb s3fs.cpp -o s3fs
10. create the file /etc/passwd-s3fs with your amazon s3 key id and secret separated by a colon ie:
    example-id:example-secret-key (note that you'll want to be careful about the permissions on this file)
11. mount the S3 bucket as an OSX directory like so eg:
    

    mkdir ~/s3
    ./s3fs your-bucket-name ~/s3 -ovolname=Flubber

    where Flubber can be whatever you want the mounted volume to appear named as
12. you can now access the mounted volume at your mount point (in the above example ~/s3) or as a Finder Volume which you can see by going to "Computer" in the Finder's "Go" menu. Not sure why it doesn't show up in the Sidebar)

Update: It seems Leopard, by default, doesn't show network volumes on the desktop by default. You can turn that on in finder preferences, but your volume still won't show up in the sidebar (under either Devices or Shared). A simple solution is to us the local option like so:

./s3fs your-bucket-name ~/s3 -olocal,volname=Flubber

Update 2: the ping_diskarb option seems to help keeping the Devices icon current:

./s3fs your-bucket-name ~/s3 -olocal,ping_diskarb,volname=Flubber

Update 3: The previous must be in my imagination:

On Mac OS X 10.5.x, both these options [ping_diskarb, noping_diskarb] are no-ops

The look and feel changes are mostly nice, but I have found one minor tweak that irritates me no end - and doesn't make sense to me from an HCI point of view.

If you have opened a drop down menu, and you decide you are happy with the existing selection, it used to be that you could "dismiss" the menu and leave it as it is by clicking anywhere on the screen outside the menu.

Now you need to either click on the selected option to re-select it, or if there happen to be unavailable options in the menu (ie. greyed out) you can click them as well.

Now that sucks from an HCI standpoint in two ways. First, to execute this relatively common action you now need to click in a quite small area instead of simply flicking your wrist and clicking. Secondly it is inconsistent with the menus in the menu bar, where you can click anywhere outside an open menu to dismiss it.

Update: It seems to have been another "glitch" because after a reboot I can no longer replicate it. Little bugs happen - at least it's not a change in the ui thinking.