There is a workaround to get Picasa to index a photo collection on an Netgear SC101. The trick is, you have to set Picasa to save imported pictures in the root of the photo drive–go Tools >> Options >> General. Click the Browse button (next to “Save Imported Pictures In”), and click OK. Picasa will then index your entire drive.
Another option you have is to use the Import functionality, and import your folders from your Netgear drive. This requires much patience, and the application may claim to be “Not Responding”, but it’s just loading information from the drive. If you have a lot of photos, this can take a while.
I still can’t get Picasa to add additional SC101 drives via the foler manager, so it’s a good thing I have a partition dedicated to just photos.