After a nights sleep for myself and the Terrastation, I removed all the disks except for the 1 new disk that seemed to format on the last successful boot. The Terrastation booted and displayed the correct firmware version in the browser. I then shutdown, added 1 new disk, and booted again. I was able to format the second disk. I did this again for a 3rd new disk. Unfortunately, the 4th disk would not format in the Terrastation, or in Windows xp, leading me to believe the 4th disk is bad.
I have concluded from this that:
1. formatting a disk in the Terrastation lays down the OS on the disk.
2. that you can boot the Terratstation with 1 disk and access it through the browser interface.
3. you can format a new drive with only 1 formatted drive.
I'm waiting for the 4th drive replacement. I will then attempt to configure RAID 5 and create my shares. I will report back.