I want to help out anyone that is looking to add or upgrade a disk in the DNS-323 without wiping out data on the existing drive. This is for disks that are in single drive mode. this is a nice 10 step process that worked without issues for me.
adding/upgrading a disk to the DNS-323 single drive mode with f/w v1.06
1. power off the DNS-323.
2. take the front bezel off.
3. remove drive(s) from bays.
4. install the new drive -ONLY- in the empty or upgraded drive bay.
5. power on the DNS-323
6. go to the web GUI and format new disk.
7. after format is done power down the unit. (do not reboot DNS-323 from web GUI)
8. reinstall the other drive back in it's original bay.
9. power on the unit.
10. Done. you should be able to access both disks and still have your data on the pre existing drive.
* I can not guaranty this will work for everyone, but this method did work for me and should prevent you from accidental/bug format of your drive that has data.
This worked for me. After step 9 I just had to perform a scandisk on the new drive after both drives were installed, then a reboot. Thanks very much for posting.
One other note, I backed up my existing drive before starting this procedure. In order to do this, I imaged that drive using Paragaon Backup & Recovery Adanced 2011 Free. In order to image the drive, I had to remove it from the DNS323 and directly connect it to my windows machine via a SATA-USB adapter with a separate power supply. I then booted directly into Paragon using the recovery CD that their software can make for you. Once booted into Paragon, I simply did a full backup of the DNS323 drive to a WD My Passport drive connected to another USB port on my machine.
Luckily, it appears I didn't lose any data on the original DNS323 drive when adding the new/2nd drive. But, I didn't want to take any chances, so I made sure I had a complete backup before embarking on the instructions in the OP.