To access the webUI configuration, assuming you haven't changed the defaults, open your web browser and enter htt://190.168.0.32/ in the address bar. That should bring up the DND-323 login screen. login to 'Configuration', then go to 'Tools' --> 'Firmware', point to where you have downloaded the new firmware on your computer and let it update what is there DO NOT switch the unit off until it has confirmed that the update is complete.
When it has updated reboot the NAS, login to the webUI 'Configuration' and format the drives from there.
Most of the problems with drive formatting stem from using the easy search CD. Since we never use that we have never had problems with formatting the drives. Also we make sure that the drive size does not exceed that that the firmware supports.