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Eventually got an answer from Symantec engineering team. The current release of the Symantec BE 2010 Domino Agent doesn't work with a UNC path to the remote NLO storage location!!!!!
So for anyone with Domino 8.5.1 set up as a Windows service, wanting to implement DAOS and wanting to use this backup product in it's current state of development, you will have to configure the Domino server Windows service to start manually and set your DAOS/NLO path to a mapped network drive e.g. Z:\DAOS.
Feedback response number WEBB85ZH2J created by ~Nita Xanveluplopikle on 06/01/2010