Hi Charels,
I spoke with one of the crawling experts here, and he confirmed the behavior you are seeing is by design. The crawl error is actually an authentication failure, but even if it did authenticate your crrawling account, it would hit the real issue.)
Basically, the crawler is not able to enumerate shares on a server. To get around this here, one of the techniques we use here is to arrange all of the shares beneath a common, shared parent. For example,
\\server\shares\ is a share and the start address for the content source.
\\server\share\user1,
\\server\share\user2,
\\server\share\user3 are crawled automatically.
The other alternative is manage a content source with a lot of start addresses, which I know you're trying to avoid. In http crawling, one trick for a similar problem (lots of random, unlinked sites) is to create a single html file with links to the top page of all of the sites, and then crawl that one html file. You could experiment with a similar workaround, perhaps using a script to enumerate shares and write the file.
Sage