I would try to use the left drive but in the right bay (switch the drives), and reformat it alone and then upgrade the firmware while the drive is in the DNS323, after that try installing Bit Torrent again using the easy share application. It worked for me, i am not sure why it didn't work for you?
sometimes when the web based config page format the HDD, i think it doesn't fully format as it next time you log in it ask you to reformat again, if that happens, try the format again and make sure it reaches 100% and give you e a success message confirmation
hope this will work this time