nice post Gan,
I just read the Apple bit on time machine.

I assumed:

1) I could use an old 250 GB external, and then time machine would back up all files that are changed starting now.

no go? the documentation implied I need to first backup everything I own, meaning I have to buy another new 3TB external is this correct? bummer if so.

2) I would also assume I can include/exclude which folders get backed up, but I did not see this in the documentation. Not possible?