I totally concur with everything you say. Like you I thought I could use it as a cutdown NAS system. Especially as good 'ole windows server 2008 R2 does not allow system image recovery from USB drives, but will if they are 'Networked' . I guess the pogoplug is a linux based cut down computer.

Has anyone managed to see if it can be tweaked to allow once only setting, Fixed IP and Samba style file systems. Sadly like you I cannot install this on my clients site. I am VERY concerned about privacy. It woud not stop sending stuff to the internet. We have only the word of a Chinese based manufacturing company that they only hold the directory information.

Note to the above, it will copy files from your other drives and send them to the internet as well. Is it paranoia? The original idea of sharing personal files over the internet with friends is great, however transparancy of operation would clear my fears.

Is there a way to set the settings in stone and turn off the internet activity?

What we want to use it for is obviously not what it was designed for.

I have a horrible feeling I will have to sell it on ebay.

I saw a user review on newegg.com that gives instructions to use this without pogoplug. Here is what it said: (I haven't tried this so I don't know if it will solve your problem)
Pros: Easy to use. No cluster of cables to hook. Just plug your mini USB drive and it is available on the network.

Cons: Yes, it does not pogoplug. But I found a way to use it without pogoplug. The instructions are as follows:

You can use this as a home network server for windows without signing up with pogoplug or installing any software.

Plug your USB drive into your computer, format it (preferably with NTFS) and create a file on it named .ceid

Using notepad, or your favorite text editor, put these lines in the file
(replacing yoursharename with a name of your own choosing). Note the mode=rw
allows reading and writing.

servicename=yoursharename
xcode.metadata=never
xcode.thumbnail=never
xcode.stream=never
cifs.mode=rw

Plug the usb drive into the Dockstar, and you're all set. The drive will be
available as
\\fadsMMMMMM\yoursharename (where MMMMMM are the last 6 letters and numbers
of the Dockstar's mac address, which is on the label on the bottom).

found the source on a website.

Anyone has an answer to this thread?? (Setting Up Docking Station without Internet Access??).