What is the filesystem format host that holds your backup device?  That could explain the 4Gb limit. Fat16 and Fat32 are limited to 4Gb.  Here's the link that contains the...

On the Security tab.  Select the radio button that states "SQL Server and Windows"  should be the first listed.  If that doesn't resolve your issue, make sure that you aren't...

If stating that it's "Not a trusted SQL Server connection" when using a SQL Account, it appears that the authentication is set to Windows only.  Make sure that both are...

Here's a link to the script that I used OFTEN.

http://www.sqlservercentral.com/scripts/savescript.asp?scriptid=26

It forces the transaction log to shrink by moving the last active transaction back to the top of the transaction log.