How to create RAID 1 when I already have 1 HD?

If you set up the v2 as xraid, then all you need to do is hot-insert the new disk (e.g., insert it with the NAS running).

As always, a backup is recommended since sometimes things can go wrong.

RAID is not exactly a backup, as there are several failures that can still destroy your data. It will allow you to keep accessing your data even if one disk fails though.

Thanks. For the sole purposes of backup, an actual backup is recommended. Also, once I've backed up my data, should I just take out the backup disk, so that I save it from wearing down, and every time I want to backup I just put it in and backup? Is there an incremental backup process in the readynas duo v2 ?

For backup, you should not use the second drive bay of the duo - those are not intended for frequent insertion/pulls, and the raid array will be rebuilt from scratch every time you insert the drive.

For backup, the cheapest options are either to use a USB disk, or install a second drive in a PC and back up over the network. The duo v2 backups can be set up as incremental (though I am not a v2 owner, so I don't know the setup details).