Windows 8 File History

I like the feature, as it exposes the "previous versions" feature of Windows 7 in a more consumer-friendly way, but it's not working for me in the Release Preview.

Windows complains that my drive is disconnected, yet my drive is connected and I can access files on it. Does anyone have any ideas? I've even tried blowing away the partition and recreating it, but still no luck.

Okay, I think I've got it figured out. When I reenable File History, it says "it looks like you have previous file histories, do you want to move them to the new location?"

If I say Yes, the program complains that my drive is disconnected.

If I say No, the program works fine and starts building up my backup.

So does this actually require an external drive or network share to work now?

Does the system still create shadow copies on the local drive?  And we don't have UI for that now?  That's how it looks from my tinkering.

@daSmirnov: No external/network drive needed. I'm using a second internal hard drive.