Can I add an external drive to the TC for more backup space?
I think there likely needs to be some clarification about what you really mean by "backup space " here.
You can certainly add another drive, and that will provide more storage capacity, but the TC and the new drive will be separate drives. They will not act as if they are one integrated or continuous drive for backups if that is what you are asking.
In other words, when you start the first backup to the new drive, it will make a new complete copy of the Mac and any other Macs that you have "pointed" at the new drive.
After making a complete copy of the Mac, Time Machine will backup only the changes that have occured since the last backup took place.
Sorry to butt into this, but does this mean you can connect an external usb based RAID 1 disk to a TC and use this as the location the TC will store backups on? I am not happy backing up to a single disk but I could buy small capacity TC and an external RAID disk if that solves my problem. I could then use the internal TC disk to store more static content like music.
That would be fine. What I was trying to explain is that if you start Time Machine backups on the Time Capsule drive and add another drive, the Time Machine backups will not continue to backup uninterrupted to the new drive.
They will start over again when they are pointed to the new drive.
Although the drive might be connected to the Time Capsule, the network will see two separate drives.