Can't erase Time Machine partition
If there is nothing else on this particular hard drive that you wish to keep, you can pick the "Partition" section in Disk Utility and repartition the whole drive to your liking rather than simply delete the Time Machine partition. You may have more luck with this than with editing the existing partitions. However, given that it's telling you it can't unmount the disk, Disk Utility may not let you do this either. You can most likely get around this by booting from your Snow Leopard installation DVD and using Disk Utility to repartition the external drive (careful, not your internal drive!) from there. Using the recovery system on the Snow Leopard DVD will avoid anything (like Time Machine) keeping the disk "busy" when you want to partition it.