Do you have a hard drive set as master plugged into the primary IDE bus? IIRC there was a kbase article describing unexpected behavior in TDM if there was no master disk on the primary IDE controller on macs. Exact same thing happened on my iLamp 800 until I took it apart and discovered that the DVD-RW drive was set as master and the hard drive as slave. Setting them vice-versa allowed TDM to work again!
EDIT: http://support.apple.com/kb/TA25584 is it. Typed all of the above on my iPhone while taking a shower. I really *need* copy/paste on the iPhone!