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I have read various howto's (http://code.stephenmorley.org/articles/time-machine-on-a-network-drive/) but not sure any were made for Lion. I got the latest netatalk setup on Ubuntu, and see the drive in Lion Finder. I created the sparsebundle and named it with my computer-name.sparsebundle but when I go into Time Machine->SelectDisk I don't get the option for my AFP drive. What can I try?

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I believe that as of Lion, your AFP server must support DHX2 or SRP authentication. Make sure your installation of netatalk has DHX2 or SRP working (not just original DHX[1] which it seems like netatalk defaults to).

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I found the problem, in the share listing in AppleVolumes.default there is a tm option to enable timemachime on the volume.

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