Hello all, I am running into the same issue... I had two 1 TB WD drives. One went bad. RMA'ed back to WD and got a new drive in the mail. New drive happens to be 1.5 TB (that shouldn't matter). During rebuild, RAID 1 reformat is failing at 1% with the dreaded 107 error.
To double check the new drive, I pulled the original 1 TB drive and just put the 1.5 TB in the NAS. After powering on, I was able to successfully format the new 1.5 TB in the NAS (so the new drive is good). So, considering that the new drive is good, I put the 1 TB drive back in and no dice, 107 error again when trying to rebuilt/format the RAID 1 array.
Any chance this issue can be fixed by the firmware? I don't have a desktop, so I can't remove all the partitions.