Assuming the NAS Navigator2 software shows your unit, the unit has a valid IP address, Subnet Mask and Default Gateway and is showing that it's in Emergency mode
Solution: Download the latest firmware to your PC and unzip the files into a directory
Edit the LSUpdater.ini file and change the values for both VersionCheck and NoFormatting to be 0 (zero)
Add these lines at the bottom of the file
[SpecialFlags]
Debug = 1
Save the file and run the LSUpdater.exe file
Right click in the window header (where it says BUFFALO LinkStation Series Updater Ver.1.32 )
Select the Debug (D) option
Check the "Rebuild partition table" and "Force update" options
click ok
click update
This will force the firmware install and hard drive initialization.
After that's done you can bring up the NAS Nav2 software, right click on your drive and the Settings option should be there and you can continue with the setup.
Good luck.
EDIT: after the above procedure, reinstall the software from the CD and it will assign the "L" drive letter to your Buffalo unit. By default it comes with RAID0 enabled so to have a useful configuration, you need to nuke that and either go with JBOD or RAID1 configuration.
The YouTube Buffalo Tech Channel (
http://www.youtube.com/results?search_query=buffalo+tech+channel ) has some helpful videos but they don't match the latest screens. If you're somewhat techie, figuring out how to accomplish the steps they show in the videos isn't too bad but can take a minute or two.
I put 2 - 3TB 7200RPM Toshiba drives in the enclosure and have nuked the RAID0 configuration. It's currently setting them up in RAID1 and from the looks of it, it may be done in about 24 hours elapsed time.