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Getting local storage to actually be useable on 3.2.1. seemed counter-intuitive to me when I did it months ago & I suspect 3.2.2 isn't significantly different...
You may want to review the following thread and review all the help pages. I think in his particular case the HA flag was checked on the storage pool causing local storage to not be an option but there are multiple steps and any of them could prevent you from moving forward. I got mine working by following the tutorial step-by-step and reading all the related pages to get a better frame of reference:
Discovering Local Drives in 3.2.2 OVM
EDIT: I just noticed that you mentioned that your OVM Manager is an upgraded instance rather than a fresh install... Most threads I have read indicate that you are better off doing a fresh install of OVM Manager where possible as the upgrades are problematic... I tried ~3.1.1 to 3.2.1 and it failed though personally haven't tried 3.2.1 -> 3.2.2.
The above being said, if you continue to have problems & there is a fresh install option for 3.2.2, you may want to do a fresh install of the OVM Manager...
Edited by: user11391721 on Apr 21, 2013 4:16 PM