Recommended backup method.

I believe that is all due to limitations of Small Business Server's built-in backup system, not the NAS.  I suspect Microsoft is trying to push you to use Azure for backup by hobbling other options.  You did not give a lot of detail on what you expected to accomplish, but I'm guessing you want this:

• Backup server to local NAS using Server included backup software, retaining older versions as well as current.
• Backup local NAS to remote NAS using NAS inbuilt backup system.

Just how important is it that the older versions are available on the local NAS?  Maybe this would work instead:

• Backup server to local NAS using Server included backup software, but not retain older versions as well as current.
• Backup local NAS to remote NAS, retaining older versions.

If it would, then you can use either the inbuilt server backup or, if more reliable, backup initiated by the NAS for the local one and ReadyNAS Replicate for the backup of the local to the remote.  The problem with local backup initiated by the NAS is it won't work well with files that are open on the server, but maybe you won't have any.  Do you have any clues as to why the backups failed going to a local NAS share instead of iSCSI LUN?

Using a .VHDX container on the NAS SMB share instead of an iSCSI LUN as the destination for the local backup is another option to pursue.  But that ends up being a single very large file to copy to the remote NAS unless you know how to mount the .VHDX in Linux on the NAS and assuming that the backup system used (ReadyNAS remote or Frontview backup) could see into that mount point.  (I don't see why it couldn't, but I'm not that skilled in Linux to try it.)

Beyond that, there is Acronis Backup and other commercial software that should be able to do the job.  But licensing for products running on a server instead of workstation isn't cheap.