+1 on this. Any decent NAS software (FreeNAS, OpenSolaris, etc) with an iscsi target will work great with the (free) GlobalSAN initiator and Time Machine.
True, but one big "gotcha" to this is that there is no way to do a complete restore from a time machine volume. There is no iscsi initiator on the OS X system DVD (and therefore no way to select your TM backup for a complete system restore).