There is no specific documentation (that I could find anyway) that state exactly how many devices can be daisy-chained to the Time Capsule. Although I would assume that the USB port on the Time Capsule is no different than the one on your Mac - which would mean up to 127 devices per host controller or USB port. Although I don't have any personal experience connecting more than one (4 port) USB hub, I noticed a reduced connection speed when trying to use more than one drive simultaneously besides the obvious fact that you are already limited by the wireless network speed. This was compared to using the same procedure while having the USB hub directly attached to my iMac.
The way the external drives show from your Mac is similar to how the Time Capsule internal drive shows. When you select the Time Capsule from the Finder window, it will show all the external drives by name. The external drives, of course, should be formatted appropriately.
In order to backup these drives, you would need additional software such as Prosoft Backup or similar. You would not be able to accomplish it using Time Machine.
Attaching an external drive using this method is referred to as network attached storage. Not all software can fully use this connection method to all of it's capabilities.... yet. So it does not function quite the same as attaching the drive directly to your computer. You would lose certain functions, like most backup solutions or being able to boot from the drives. Even some software doesn't recognize the drives as usable storage.
