One additional note when dumping to devices in v6.5.

You can specify a UNC (i.e. \\servrename\share\etc) when you create the dump device.

However unless your network is as fast as lightening it will fail and worse, create corrupt backups that you mau never know about until you try and restore one !

Local devices are the best choice right after the first choice of 'getting to a much newer, and supportable version', of SQL Server.