After formatting failed at 94% many times, I finally woke up this morning, unplugged the power cord, held in the reset button and when it restarted, it then wanted to format BOTH drives. I was horrified, so I hit skip and went to the status page. On that page, it said that it was rebuilding the RAID 1 and I needed to wait 140 minutes. Lo and behold, when it was done, everything was fine.
Now, I'm going to cross my fingers and move back to FW 1.08 again. Wish me luck.